TSQ - NYSE

Thank you, operator, and good morning to everyone. Thank you for joining us today for Townsquare's first quarter financial update. With me on the call today are Bill Wilson, our CEO; and Stuart Rosenstein, our CFO and Executive Vice President. Please note that during this call, we may make statements that provide information other than historical information, including statements relating to the company's future expectations, plans and prospects. These statements are considered forward-looking statements 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 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. We may also discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and adjusted operating income, which we may refer to as profit in our remarks. 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 would 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. I've been looking forward to our call this morning for quite some time as we've had an exciting start to the year. I'm pleased to be able to provide you an update on our strong Q1 performance, discuss the announcement of our Cherry Creek acquisition as well as reaffirm our very strong outlook for the year, including our expectation of all-time high record level profits for Townsquare. Our first quarter financial results reflect strong growth and strong margins. And as a result, the Townsquare team exceeded our first quarter revenue and EBITDA guidance, as outlined on Slide 18. First quarter net revenue increased a very strong plus 13% year-over-year to $100.2 million, above our guidance range of $97.5 million to $99.5 million. And importantly, we have now meaningfully surpassed 2019 levels, with first quarter net revenue exceeding 2019's net revenue by plus 7%. Our first quarter adjusted EBITDA also increased double digits, up a robust plus 10% year-over-year to $22.1 million, also above our guidance range of $21 million to $22 million. And of course, that also exceeds 2019 levels as we have now been above 2019 EBITDA levels for 6 straight quarters since the fourth quarter of 2020. Now that we have successfully recovered and surpassed pre-COVID levels for both net revenue and adjusted EBITDA, it is no longer relevant to be comparing our results to 2019. Organically, Townsquare is above 2019 pre-COVID revenue and EBITDA levels due largely to our consistent digital strength and our digital growth. In the first quarter of 2022, our digital revenue and digital profit increased plus 16% and plus 11%, respectively, over the prior year. In total, 51% of our Q1 revenue and 55% of our Q1 profit came from our digital solutions. Let me repeat that as it is a clear differentiator for our company. 55% of our Q1 profit came from our Digital Solutions for local businesses. Despite this fact, too many investors continue to perceive us as a radio company. And in fact, we currently trade at a discount to other radio broadcasters who have far less digital revenue and digital profit. While it's true that we have great market-leading local radio stations that we love, radio is only a component of our business. We view local radio as an extremely valuable asset, with significant and attractive cash flow properties, unparalleled consumer reach and an important and trusted local connection to our audience and communities, and thus, a component of our multi-platform diverse local media business. But radio is a mature cash cow business, and radio is not our primary growth driver nor has it been for some time. Our growth engine has been digital and it will continue to be digital moving forward. In order to demonstrate and reinforce that point, let me briefly dive into our digital platform and its financial results. As a reminder of the extremely valuable and quite differentiated digital assets we have at Townsquare, first, it is extremely important to acknowledge that our entire digital platform has been developed organically by our own very talented product design and engineering team, many of whom have been with Townsquare since day 1. They are our digital backbone and have developed countless products and tools for Townsquare, including our content management platform, our subscription digital marketing solutions platform and our premium Digital Advertising products and solutions. I am very proud to announce that this team was just awarded with the NAB 2022, PILOT technology Innovation Challenge award for the creation of our own CRM, customer relationship management platform, which we call Blueprint. Blueprint is a true game changer that was built based on feedback from our own local markets, allowing both our managers and our salespeople to effectively manage and grow their business without the recurring cost of a third-party CRM. The fact that our digital products and solutions are in-house and are not outsourced is a significant, significant competitive advantage that grants us the ability to fully control the customer experience from the point of sale to execution and reporting, which enhances our customer retention. Having these solutions in-house also enhances our digital profit margins as evidenced by our results. Our Digital Advertising segment, marketed externally as Townsquare Ignite, is presented on Slide 15. This segment includes a portfolio of over 340 local and national news and entertainment websites and mobile apps that generate over 60 million monthly unique visitors, have over 40 million followers across social platforms and generated over 3.5 billion lifetime views across our YouTube platform. We have organically built and sustained this audience through our focus and investment in creating high-quality local content curated to our local audiences. On average, we publish approximately 20,000 pieces of content each month across our portfolio, making us one of the largest producers of local content in the United States. In addition, we organically built a digital programmatic advertising platform that has access to more than 250 billion impressions per day, and created a data management platform with rich and valuable first-party data with 15 million user profiles. We use this incredibly valuable first-party data collected from our own audience for advertising on both our owned and operated brands as well as on our digital programmatic solution. Being a large at-scale publisher with first-party data is a significant competitive advantage in digital advertising, especially in the programmatic business as we are able to be more effectively targeting our customers' desired audience. As we prepare for a potential Cookieless World, publisher own first-party data becomes even more critical. Let me now highlight our digital financial performance, which continues to be very strong. In the first quarter, Digital Advertising net revenue increased plus 17% year-over-year and Digital Advertising profit increased plus 13% year-over-year. On a trailing 12-month basis as of March 31, we generated $121 million of Digital Advertising net revenue and $38 million of Digital Advertising profit, a 31% profit margin. The other critical component of our digital business is Townsquare Interactive, which is our subscription Digital Marketing Solutions segment discussed on Slide number 13. This business is a significant differentiator for us versus other local media companies for 2 reasons: one, most local media companies don't offer their clients this service and solution; and two, Townsquare Interactive is a monthly recurring subscription-based model that generates a substantial profit. On a trailing 12-month basis as of March 31, Townsquare Interactive had $85 million of subscription revenue and $25 million of subscription profit, a 29% profit margin. We have consistently grown Townsquare Interactive's revenue, profit and net subscribers since its launch in 2012. And in the first quarter of 2022, net revenue at Townsquare Interactive increased plus 15% year-over-year, and profit increased plus 7% year-over-year, and we added approximately 1,050 net subscribers, 200 more than the first quarter of 2021. This business has incredible upside due to its substantial addressable market of $32 billion or nearly 9 million customers as outlined on Slide number 14. With 27,850 subscribers at the end of the first quarter, we are only scratching the surface. As we have discussed, a key component of our Townsquare Interactive growth plan is to open a second location, and we are close to signing a lease for our new Phoenix location. We are planning some modifications to the office space and expect to physically move in during the second half of 2022. In the meantime, we continue to ramp our sales and support teams for both our legacy Charlotte office and our soon-to-be open Phoenix office. As we have previously stated, we are confident that we will be able to scale and operate the second location at strong profit margins, given our history and experience from launching TSI organically in Charlotte, a decade ago. In total, we expect that our digital revenue will grow from $206 million of digital revenue on a trailing 12-month basis as of March 31, to a minimum of $275 million of digital revenue by 2024. On a trailing 12-month basis, our digital profit was $63 million, a 31% profit margin, and we expect margins will continue to be very strong going forward. Importantly, we resegmented the business at the end of last year, highlighting the profit characteristics of our digital platform, essentially equal to our broadcast platform, each with profit margins of approximately 30%. It is our expectation that given this new and more detailed information, Townsquare will begin to get credit and value for being a digital-first local media company and will be afforded a sum of the parts valuation that gives credit to our digital assets and strong digital profit, which, as I noted earlier, was 55% of our total profit in Q1. Credit, which to date, we have not yet received. Last month, we announced the accretive acquisition of Cherry Creek Broadcasting. While it may seem counterintuitive to some to invest in more local radio stations, given that radio is a mature cash cow business, it is because of our Digital First Local Media strategy that this investment makes so much sense. We will bring our large-scale, sophisticated digital platform solutions and expertise to the Cherry Creek markets and team, which today generates only 15% of its revenue from digital solutions, the majority of which is outsourced digital solutions, which generally lowers profit margins. Based on our own experience, we know that we can drive accelerated digital revenue growth at stronger and more profitable margins such that within a few years, the Cherry Creek markets will be approaching a 50% digital revenue contribution and a 30% profit margin just like Townsquare has today in digital. At the same time, our acquisition strategy has always been to invest in market-leading properties in markets outside the top 50 cities, with stabilizing institutions such as 4-year universities or military bases. This approach ensures that we will have an optimal competitive and economic landscape to launch our Digital First Local Media strategy. The 35 stations in 9 markets that we'll be adding to our portfolio with this acquisition fit these criteria. With their heritage, strong local brands, many of which are #1 in their format, we are confident that we will have a long-term stable broadcast base from which to inject our digital growth engine. And importantly, this furthers our ultimate goal of being coming the number one local media company in markets outside the top 50 cities in the United States. For example, this acquisition will greatly strengthen our existing competitive positions in the great state of Montana and Washington, where we already own radio stations today. From an economic standpoint, the acquisition also makes tremendous sense. The $18.75 million acquisition is immediately accretive, can be financed with cash on hand and is net leverage neutral. Given our strong cash flow ability, it also does not impact our target net leverage goal of 4x by the end of 2022. We expect the acquisition will close relatively soon following FCC approval. Our broadcast advertising business continues to post-COVID recovery growth, with net revenue increasing plus 8% and profit increasing plus 5% year-over-year despite continued strong headwinds from the auto industry. We do not expect auto advertising to return to growth until sometime during 2023. Our digital solutions benefit our radio solutions, and our radio platform and reach supercharge our digital solutions. In the long term, we view local radio as an extremely valuable asset, with significant cash flow properties, unparalleled reach and an important local connection to our audience and communities. But local radio is a mature cash cow business. Our strong revenue and profit growth will continue to be driven primarily by our digital platform and solutions for local businesses. It's been a great start to the year. and all credit is due to our incredible, incredible Townsquare team, who have fully embraced our transformation to a Digital First Local Media Company, and who super serve their local communities and their local businesses each and every day. I look forward to growing our team with the acquisition of Cherry Creek and the addition of their stellar employees, many of whom I've already visited with and had the opportunity to meet and spend time with. Now I'll turn the call over to Stu, who will break down our very strong results and outlook in much greater details for everyone. Stu, take it away.

Thank you, Bill, and good morning, everyone. We started the year with strong first quarter financial results that exceeded 2019 revenue as well as our guidance, driven by growth across all our segments. First quarter net revenue increased 12.9% over the prior year period to $100.2 million and above our guidance range of $97.5 million to $99.5 million. As compared to 2019, first quarter net revenue increased 7%. Excluding political, first quarter net revenue increased 13% year-over-year. Political revenue of $432,000 was below 2018's political revenue, and therefore, below our expectations for political this quarter. Although off to a slow start this year, we still believe that political revenue for 2022 has the potential to exceed 2018 political revenue of $10 million. First quarter adjusted EBITDA also surpassed our guidance of $21 million to $22 million, up 9.8% year-over-year to $22.1 million. Excluding the impact of political revenue in the first quarter, adjusted EBITDA increased 10% versus the prior year. Our Subscription Digital Marketing Solutions segment, Townsquare Interactive, again delivered another strong quarter of net revenue, profit and net subscriber growth. In the first quarter, net revenue increased 15% as compared to the prior year. This revenue growth was supported by a Q1 record high net subscriber additions of approximately 1,050. This compares to approximately 850 net subscriber adds in Q1 of last year. Townsquare Interactive's first quarter profit increased 7.5% year-over-year to $6.4 million with a 29% profit margin. That's consistent with our 12-month trailing profit margin. Our Digital Advertising segment's net revenue increase was even stronger and thus the fastest-growing division of our company with growth of 16.6% in Q1 over the prior year. Digital Advertising profit, which we just started breaking out and providing details on in March with our year-end results, increased 13.1% year-over-year to $8.2 million in Q1, with a 28% profit margin. In total, digital revenue composed of our Subscription Digital Marketing Solutions segment and our Digital Advertising segment increased year-over-year by 15% in the first quarter. And as Bill noted earlier, represented 51% of our total net revenue, and Q1 digital profit represented 55% of our total profit. At $206 million of revenue for the trailing 12 months ending March 31, we are well on our way to our goal of generating a minimum of $275 million of digital revenue in 2024. Even with increased internal investment to leverage the market opportunity and our differentiated digital solutions, we expect our digital margins to continue to be in the high 20% range in 2022. First quarter Broadcast Advertising net revenue increased 7.7% versus the prior year and 7.8% excluding political revenue. Broadcast Advertising profit improved by 5.1% year-over-year. Our other category, which is Live Events, had revenue of $1.1 million and profit of $227,000, which is still only a fraction of 2019's Live Event activity. However, our Live Events were operated at an overall profit margin of approximately 21%. As a reminder, Live Events are not a material part of our business, nor a growth vehicle for our company, but rather act as a profitable marketing arm of the company, providing yet another way for us to connect with our audience and communities and allowing advertisers to do the same. In a normal operating year, Live Events revenue and profit is less than 5% of the total company revenue and profit. We do expect to see some pickup in live events in the second quarter as we have scheduled 27 events, including Buffalo's Taste of Country concert, Tyler's Red Dirt BBQ & Music Festival and Taste of Fort Collins. However, for Live Events, we will still be below 2019 levels and expect that to be true for the remainder of 2022. First quarter corporate expenses increased $275,000 primarily due to an increase in professional fees. First quarter net income increased $8.9 million to $2.7 million or $0.11 per diluted share as compared to a loss of $6.1 million or a loss of $0.35 per diluted share in the first quarter of 2021. Adjusted net income, which excludes one-off items and is detailed in the schedules to our earnings release, was $3.8 million or $0.19 per diluted share for the first quarter in 2022. We'd like to remind you that any benefit or provision for income taxes included on the face of the income statement is for GAAP financial statement purposes only. We maintained significant tax attributes, including $172 million of federal NOL carryforwards and other substantial tax shields related to the tax amortization of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately 2026. In the first quarter of 2022, we generated positive cash flow from operations of approximately $8.6 million after a $19 million cash interest payment in February. Our total cash balance was $50.9 million at the end of the quarter. With total debt of $550 million, and a trailing 12-month adjusted EBITDA of $107.1 million as of March 31, our net leverage has declined to 4.66x from 4.75x at year-end. We are focused on continuing to reduce our net leverage with a target of 4.0x, which we believe is readily achievable by the end of this year. February of next year, we will have the ability to refinance our $550 million, 6.875% senior secured notes when the 2-year no-call period expires. If market conditions permit, we believe it will be possible and advantageous to replace our outstanding senior secured notes with the term loan facility. We believe this capital structure could result in a lower annual interest rate as well as afford us the ability to prepay the loan at any time. As Bill mentioned, we signed an agreement to acquire Cherry Creek Broadcasting for $18.75 million, which will add 35 stations across 9 new markets to our local market portfolio. The transaction, which we expect will close relatively soon, will be funded entirely with cash on hand. Even with this use of the $18.75 million of cash, we still expect to reach our goal of 4x net leverage by year-end, given our very strong cash flow generation. Our primary capital allocation priority for the remainder of the year is to reduce net leverage so that we may successfully execute a refinancing next year. Although the Board has authorized a $50 million, 3-year stock repurchase program, and we sincerely believe our stock is undervalued today, our priority is net leverage reduction. To that end, in April, we repurchased and retired $9.3 million of our 2026 notes at par. As always, we will also continue to invest in our local business in order to support and continue to drive revenue and profit growth. Turning to our second quarter outlook. We expect second quarter net revenue to increase and be between $117 million and $121 million, which is a 9% to 12.7% increase over the prior year. We expect second quarter adjusted EBITDA to be between $32 million and $33 million. That is a year-over-year increase of 5.6% to 8.9%. For the full year 2022, we are reaffirming our net revenue guidance of $460 million to $475 million, representing a year-over-year increase of 10% to 14%. We are also reaffirming our adjusted EBITDA guidance of $115 million and $120 million, which is a year-over-year increase of 9% to 14%. And with that, I will now turn the call back over to Bill.

Thank you, Stu, and thank you, everybody, who joined us this morning. We greatly appreciate it. I'm extremely proud of our team and our first quarter results, and I'm extremely excited about our future. We have fully recovered our revenue and adjusted EBITDA to pre-COVID levels, and we will continue to drive Townsquare to new heights each and every quarter. Our digital platform now more evident to have investors due to our new segment reporting, continues its steady growth, with over $200 million of LTM revenue today, growing to a minimum of $275 million by 2024. Over half of our company's total net revenue and total profit came from digital in Q1. Our balance sheet has improved dramatically over the past year, and net leverage is now at 4.66x, well on the path of 4x by the end of the year. And then the potential opportunity to refinance in 9 months that could lead to meaningful cash interest savings. As we say internally, how high is high. Thanks, again, to all, and please do not hesitate to reach out if you have any more questions about Townsquare. Operator, at this time, please open the lines for any and all questions.

[Operator Instructions] The first question is from Michael Kupinski from NOBLE Capital Markets.

First of all, congratulations on your record quarter. Can you talk a little bit about your office expansion plans? I know that you opened an office in Phoenix, but I thought that you were opening offices in California, and I was just wondering if you could talk a little bit about maybe your additional locations, and what your time line might be for those?

Our Townsquare Interactive office expansion plans. We've always said West Coast, but in fact, we are signing a lease in Phoenix. We've hired roughly [30] employees who currently are based in that location, but working remotely while we do the build-out of the office space and expect them to be operating in the office in the back half of this year, but it is Phoenix, not California, if that helps.

And Bill, you were contemplating of maybe opening up additional offices like maybe in the Midwest. Is that still on part of your plan or...

That would be -- we've talked about that in terms of in the out years, saying 3 to 5 years out as we open the second location, could we potentially open a third location. But currently, our short-term plans are the second location. Really just given the total addressable market that we've outlined for Townsquare Interactive at $32 billion, we continue to highlight that we're just scratching the surface. We're approaching 60% of our customer base outside of our local market footprint and obviously 40% percent in our local market footprint. So we continue to accelerate that investment in Townsquare Interactive. We're really pleased with our continued strength there. We've set a record for our Q1 most number of net adds in Q1 obviously, continued strength almost adding $3 million in revenue in Q1 to Q1, plus 15%. So we're excited to open this location. I would focus on that. And then is there potential for a Midwest location down the road, definitely, but our current focus is Phoenix.

And then another differentiator of yours from other radio companies is that you concentrate in smaller markets. And for that reason, you may have very little national advertising. And I know that a lot of radio companies have indicated that national advertising is weak. But for the record, how much of your business is national advertising?

Yes, you're exactly right. The fact that we operate principally outside the top 50 cities in the United States, not only for our local media where we have presence, but also when we utilize our, what I would call, world-class call center inside sales team in Charlotte, we're calling like-sized markets outside of the top 50 markets. So to your point, our national advertising is very, very different than larger -- in top 50 players who are principally driven revenue and profit from those top 50 markets. So our national advertising is roughly 7% of our total net revenue. Quite honestly, national performed quite well in Q1. It was up -- from a broadcast perspective, was up over 2019 levels as was our local direct was up over 2019 levels. So pretty much our broadcast business, I would call back to 2019 levels outside of auto and some retail, particularly appliances and furniture, where there's either chip supply or supply chain issues. But we've done quite well. To your point, we've had the benefit of hearing other local media, including broadcast companies talk about their Q2. And national for us definitely has stalled in Q2 versus Q1. But thankfully, for us, it's such a small piece of our business that our continued strength in local direct and local broadcasting, our Q2 outlook continues to be solid for broadcasting. And quite honestly, our Digital Advertising outlook in Q2, we believe, will be higher than Q1. So we see an acceleration of Digital Advertising in Q2 after having a very strong plus 17% quarter in Q1 and digital revenue being up 16% in Q1 and digital profit being up 11%, which brought us to, for the first time ever, over 50% of our revenue and 50% of our profit was from digital solutions, 51% of our revenue and 55% of our profit now comes from digital solutions. So having, to your point, operating in smaller markets, being -- having transformed to a digital-first company, having differentiated ourselves and really being focused on digital as our growth engine has set us up quite well. And as we noted, we reaffirmed our guidance for the full year, and we gave strong Q2 guidance, revenue range plus 9% to plus 13% and profit range plus 6% to plus 9%, which I think just reaffirms our confidence not only in the year, but as we sit here in early May for Q2.

And Bill, you touched on this in your comments. Is there anything in the guidance for the Q2 that may reflect different -- maybe differing revenue trends, whether it be advertising categories or regions in the US. Anything different than what we saw in the first quarter outside of what you just indicated in terms of digital? It sounds like it's accelerating in the second quarter.

No, I think, from an advertising standpoint, as I just noted, we see nice tailwinds for Digital Advertising. I think that's going to be above our Q1 growth rate of 17%. I think we could be in the 20%, 20% plus range for Digital Advertising in Q2. And there, we're seeing strength in real estate, commercial and residential, health services like doctors, hospitals, clinics, financial services, entertainment, services like builders, contractors, HVAC. So we're feeling quite good there. As it relates to broadcast, I just noted, obviously, for Q2, national has definitely slowed down, but thankfully, that's a small part of our business. Local direct continues to be up above 2019 levels and well above 2021 levels. We do still see weakness in auto. Not only is autos down from 2019, it's actually down from 2021, and we expect that to continue into 2023. As we get into Q2 and even Q3, auto and appliance stores and furniture stores have larger comps, meaning we got more revenue in Q2 and Q3 in those categories. So that will be a slight drag. But overall, we still have very solid broadcast expectations for Q2. And overall, as I just noted, our revenue guidance for Q2 is plus 9% to plus 13%.

The next question is from Jim Goss from Barrington Research.

I'll start out with one for Stu. You mentioned political was off to somewhat of a slow start, but you still had the $10 million full year insights. I was just wondering if you had an idea of why that might have happened and what the issues were, whether that can impede your progress towards your ultimate goal?

Quite honestly, no. It's kind of hard to tell when political comes in. Sometimes it comes in quickly and unexpectedly, and sometimes it comes in a little slower. Our people are out there doing everything they need to do for this year. The midterms are coming up. We're starting -- we're hoping to see some improvement coming into the summer months. And we're hopeful that we'll see everything that we're going to get everything that we hope to get and come -- get back to 2018 levels.

Another, involving the Cherry Creek Broadcasting acquisition. I gather you're targeting all 3 of the digital aspects you have to your business. And I wonder if you might talk about how you might involve the local influencer plan, and how you might execute on that transition to make it more like the other Townsquare stations? And do you see more such options that might make sense? And are there any geographies you would be -- you would find desirable or not so much?

So we're quite excited about Cherry Creek. As I noted in the prepared remarks, I've already visited a number of their markets and spent time with their team and actually, at the end of this week, we'll be going to visit the rest of the team. And they're quite excited. They've done quite well from a broadcast perspective. They're back to 2019 levels, if not above 2019 level. So it's a very well-run company. But roughly 10% to 15% of their revenue is digital. So we see market-leading brands, great local sales team, great leaders that we can bring to the table, our digital platforms, as you just noted. And having spent time with the team now in person as well as through town hall, virtual calls with all of Cherry Creek, they're quite excited to adopt this and help their local businesses grow and reach their audiences in new ways. So, to your point, you'll see us deploy; first, our digital strategy in terms of building a digital audience and becoming, if not the largest, one of the largest online presences in these additional Cherry Creek market. And then we'll bring our Townsquare Interactive and our Townsquare Digital Advertising Ignite to these sales teams into these markets over the next 6 to 12 months once the FCC grants us approval, which we're expecting in the next couple of months. So couldn't be more excited, as I noted, taking a pure broadcaster, which we've had great experience with over the last 12 years and diversifying that to a digital-first company is something we excel at.

In terms of other such [Indiscernible] potentials around the country that would make sense within the context you've outlined?

I think we noted this before, Jim, like we are the natural acquirer of local media assets outside the top 50 markets. Quite honestly, we've been quite disciplined and consistent in operating even when we've had opportunities to go into top 50 markets. Our strategy works so well, and I think we performed quite well in these size markets. We understand it exceptionally well. So there are many other opportunities that, particularly given the Charity Creek acquisition, I think surprisingly, it took some by surprise, even though we've been talking about growing our footprint at the right price with great brands. So first, for the rest of this year, obviously, Cherry Creek was bite-sized, under $20 million acquisition cost, great. We got it at an attractive multiple. We -- as Stu noted, our focus right now is delevering, getting down to 4x. And if the financial markets cooperate, being able to refinance in February of 2023. Post that time period, either if we do refinance because we'll be continuing to build cash, quite a bit of cash throughout next year, or if the markets do not cooperate and we don't refinance, either outcome, I think there'll be greater opportunity for M&A outside the top 50 markets as we go into 2023, particularly coming off a political year. So that's what we're focused right now on delevering. But I think if you look at the next 2 to 3 years, we're the natural acquirer of these type of assets.

And one last one regarding TSI. You've talked about the trust and bond with local customers you were able to develop and the creative aspects of your engineering staff. I'm just wondering if all of this, as you pursue this path, if it fosters other types of relationships that could create premium add-on services that could increase ARPU beyond the, say, $300 per month average monthly fee? Or is there enough of that $300 business to make it -- make you better off by not messing with the current plan?

Well, yes, great question, and I appreciate you noting the trust and the bond and just the engineering staff, as I noted in our remarks and we highlight them in the investor deck. It's just an incredible team, and one of our differentiator is that all of our growth has been organic. Our digital growth isn't based on acquisitions. It's all us building solutions, knowing the mentality and the challenges of businesses in these size markets and then we go and build solutions, having gotten their feedback that serves their needs. And our engineering team, many of which have been with us since Day 1 and 2010 is just world-class. So it was great to see them receive some accolades at the NAB show for the pilot award, just couldn't be more proud of them. So first and foremost, not adding on any services, clearly, there's a tremendous $32 billion market opportunity, which we outlined in the investor deck with almost 9 million target subscribers for our subscription service, and we're just under 30,000 or approaching 30,000. So continuing to operate. Increasing investment like we're doing with our Phoenix location, we feel quite confident that we're going to continue to be able to grow over -- we're looking at, I think it was in Q1 at plus 15%. We'll get into plus 14%, plus 15% in Q2. And each year, for the last 6, 7 years, we've added roughly $10 million minimum top line and $3 million bottom line. So continuing down the steady state of what we're doing, increasing our investment. We couldn't be more excited about our subscription business. But you bring up a point that we are looking at opportunities to add on other services for these types of clients. Could they be human resource type add-ons, accounts payable type add-on? We built the CRM, the customer relationship management platform. We've talked to SMBs about that. So those are all future opportunities that we could add on to our existing digital marketing solutions for greater ARPU, and we're testing some of those. But our current steady state is really just tapping what we are doing. But that said, Jim, you bring up a good point that there are future opportunities for premium add-ons to drive even greater ARPU.

This concludes the question-and-answer session. I'd like to turn the conference back over to Bill Wilson for any closing remarks.

Thank you, everybody, for dialing in this morning. We're quite proud of our results and really excited for the rest of the year. If you guys have any questions, please don't hesitate to reach out, and have a great day.