Thryv Holdings, Inc. (THRY) Q2 2013 Earnings Report, Transcript and Summary

Good morning, and welcome to Dex Media's Second Quarter 2013 Conference Call. With me today are Peter McDonald, Chief Executive Officer; and Dee Jones, Chief Financial Officer. The statements made by the company today during this call, are forward-looking statements. These statements include the company's beliefs and expectations as to future events and trends affecting the company's business and are subject to risks and uncertainties. The company advises you not to place undue reliance on these forward-looking statements and to consider them in light of the risk factors set forth in reports filed by Dex Media and its predecessor companies with the Securities and Exchange Commission. The company has no obligation to update any forward-looking statement. A replay of the teleconference will be available at (800) 585-8367. International callers can access the replay by calling (404) 537-3406. The replay passcode is 19149862. The replay will be available through August 21, 2013. In addition, a webcast will be available on Dex Media's website in the Investor Relations section at www.dexmedia.com. At the end of the company's prepared remarks, there will be a question-and-answer session. And now I'd like to turn the call over to Peter McDonald. Peter?

Thank you, Paula, and welcome, everyone, to the second quarter earnings call for Dex Media. I'll make some comments about the quarter, and then Dee will follow up with a review of the financials. We will then take your questions. This was an eventful quarter with the completion of the merger between Dex One and SuperMedia on April 30. The combination of these companies is good for shareholders, lenders, our clients and the future of our employees. I again recognize and thank the Boards of Dex One and SuperMedia, as well as our advisors, lenders and shareholders for your support. We are now 3 months into integration, and we have accomplished a lot. While the merger was consummated 4 months later than originally planned, all of the planning that had been done prior to the closing date is paying off, and we are seeing the benefits in best practices, strengthened management teams and synergies. I'm very pleased with how the teams are working together, and I can say we are on track in that regard at this point. We have evaluated nearly all the jobs in the company. We have made some tough decisions and have identified and put in place our top 127 managers in just the first 2 months of integration. It is interesting and significant that our management team consists of nearly an even split of people from both predecessor companies. I'm very pleased with the talent in the new company. It is important to get leadership team in place so that we can make the decisions necessary to drive the business forward. This has been a distracting time as people needed to get the "me questions" resolved. With nearly 5,000 people now in place in 135 locations, we are anxious to continue to make progress. The HR and legal teams have done an outstanding job of getting this work completed. In each of the functional departments, we have quality leadership in place and are moving forward each day to improve this business. Marketing team is working on migrating the best products across the entire footprint and leveraging best practices. The bundles Dex One used will be rolled out to the former SuperMedia footprint, and the former SuperMedia digital bundles will be rolled into the former Dex One markets. Over the second half of 2013 and into 2014, we look forward to rolling out additional products across our entire combined footprint. Getting all the systems ready to accommodate these new products is high on our list of priorities as we migrate our customer base to the digital world. As we get deeper into this combination, it is clear that a lot of quality work was done in each organization prior to the merger. Our technology and system teams are outstanding and are well on their way to integrating multiple systems to accommodate the products and changes made in integration. Again, we're very pleased with the leadership and partnering that has taken place this quarter. The operations teams have played a large role and -- as we continue to see bad debt decline and efficiencies improve. Everyone is participating in finding new ways to do business more effectively. In sales, we have a very dedicated and quality team focused on our clients and their needs. We continue to build strong relationships as we retain our clients in the 80% to 85% range. The combination of channels available and managers in place, we are working on our plans to improve the top line and attract more clients. Recurring revenue, on a dollar basis, for our clients has been in the 70% to 80% range, which indicates they are receiving value and getting results from our products and solutions. This year, we have seen stronger recurring revenue among clients who purchased bundles last year. Our new business is in the 3% to 5% range, and we see an opportunity to improve this. In terms of the second quarter and year-to-date, sales trends are not what we would like or what we expect them to be, once we have completed the merger integration and our team's products and processes are in place. We continue to see increasing pressure on print. The combined sales trends across all products and markets over the past 2 quarters have remained consistent. Meanwhile, digital sales growth has slowed in the first 2 quarters of the year. 3 factors account for this trend: first, we saw some weakness in the national channel for both print and digital, particularly among clients that work through digital agencies; second, the penetration growth of bundles in the former Dex One markets has slowed. Bundling did help drive and establish initial digital relationships with many clients in the former Dex One markets. Now our attention will turn to growing that relationship by upselling existing products like SEM or adding new products such as video or text marketing; and third and perhaps the most important, the merger and integration have caused some distractions that impacted performance across the board. Although these factors caused digital growth to slow in the first half of the year, the digital business continues to move in the right direction as we create bundled solutions that are very attractive to local advertisers and lead to high retention rates. Our digital business has significant scale with over $260 million in ad sales in the first half of the year. This quarter, I have been in the field to welcome new associates and make sales calls. I have been impressed with the people I've met and the sales calls that I've been on. We have improved our approach, skills and knowledge in both former companies. On a call last week with a home improvement contractor in New Jersey, it was great to hear the clients say to his marketing consultant, "I trust you." He tracks every call to his business and our marketing consultant helps him see the business he gets from his advertising programs. And [indiscernible] with a dentist. I again saw the trusted relationship between the client and our marketing consultant. The dentist had doubled his business with the Dex One bundles and was very happy. We have a powerful platform with the combination of print, digital, bundles and the ability to track performance, as well as our hundreds of thousands of client relationships. Our patented technology, Merchant Platform, continues to give us an efficient way to distribute our clients' messages and get results that we track daily. Along with the algorithms of DexNet, we can provide customized programs that track their performance. We have been committed to selecting the best people and best practices, and we know this will pay off. All the work in the next quarters will be designed to improve our sales trends and help us acquire more clients. With most of the people issues out of the way, our focus now is on building a solid foundation for 2014. Over the next 2 quarters, our teams will be devoting much of their attention to the markets that we'll be launching in Q1 of next year. We have the people. We have quality products and solutions. We are increasing our focus on recruiting and training, and we look to implement more segmentation going forward. With initiatives like text marketing, our mobile solution that allows businesses to target their message by category and geography, we like the opportunities ahead. Local businesses want a single point of contact in this complex digital marketing world, and that is what we do best. On the expense side of the business, Dee and his team have partnered very well. The finance team has done an excellent job in managing the expenses and helping to drive a healthy 39% margins and strong cash flows that we used to repay over $200 million in debt in the first half of 2013. I also want to recognize finance for the great job they have done in getting our quarterly financials out, given the complexities of the merger and the need to combine the financial reporting of 2 companies. I'm pleased to report our integration process has been incorporated seamlessly into our normal business planning activities. While our sales continue to lag expectations, we look to improve these trends as we employ best practices around -- across the combined footprint. In closing, I want to recap 3 points about the quarter: first, the combination of Dex One and SuperMedia that we closed at the end of April. We have completed a transaction that we believe will be good for all stakeholders involved. The merger creates a company with a strong platform to deliver marketing services to small- and medium-sized businesses throughout the country; second, we have accomplished a lot of integrating 2 predecessor companies by building a foundation for the future for Dex Media. Our integration is on track, and we have the right people and the right processes in place; and third, sales trends are not yet where we want them or expect to be, but we have clearly identified the levers to drive improved performance. This will be our top priority for the second half of the year. We are excited about what is ahead, and we look to make the most out of our opportunity. We appreciate your support and interest. Now let me turn it over to Dee.

Thank you, Peter, and good morning, everyone. I'd like to start by thanking the teams that are working hard on the merger integration. This is an exciting time for Dex Media as we put the foundation in place for the company's transformation and future success. While Peter gave you an overview of the operational highlights, I would like to review the financial results of the quarter. Before we begin, I will mention that some of the results I will be speaking to this morning are non-GAAP numbers. We have provided a reconciliation of non-GAAP to GAAP results in the appendix of this presentation. Moving on to the financial results. Total multi-platform ad sales for the second quarter declined 16% as compared to the same period last year. Print declined 22%, partially offset by digital growth of 6%. As Peter mentioned, local has performed better than overall ad sales in the first half of the year with national second quarter results negatively impacting overall by 110 basis points. Print was impacted by 40 basis points from the national performance, and digital was impacted by 240 basis points. These ad sales results reflect the standard reporting methodology for the combined company. Reporting of print ad sales was pretty consistent across both predecessor companies as to timing and methodology. With respect to digital ad sales reflected here, the go-forward methodology is more like the former Dex One's bookings calculation. As Peter mentioned, we are in no way satisfied with these top line results. As we bring the best practices and solutions of Dex One and SuperMedia together, we will be striving to improve these trend lines. We will have more to share as we move through the remainder of the year. For the second quarter, Dex Media reported pro forma combined operating revenue of $568 million, a 17% decline for the quarter compared to the same period last year. Adjusted expenses were $344 million, and adjusted pro forma EBITDA was $224 million for the quarter. For year-to-date, pro forma combined revenue was $1.149 billion, a 17.4% decline compared to the same period in the prior year. Year-to-date adjusted expenses were $695 million, and adjusted pro forma EBITDA was $454 million. Adjusted pro forma EBITDA for the quarter and year-to-date excludes $28 million of net integration costs and $34 million of merger transaction costs. We were able to maintain cost controls across all functions, resulting in an adjusted pro forma EBITDA margin of 39.5% for the first half of the year, excluding the merger integration costs I just mentioned. Pro forma free cash flow for the 6 months ended June 30 was $176 million, which includes the cash impact of $50 million of integration and merger transaction costs. In terms of the debt balance, year-to-date, we have reduced our total debt outstanding by $201 million, leaving a debt balance at par of $3.287 billion and cash on hand of $244 million at the end of the second quarter. Finally, the December 6 lender presentation released publicly included forward-looking financials and other metrics for the standalone and combined companies. We are not looking to update that information at this time. And at present, it is not our policy to provide guidance. With that, operator, we are ready for questions.

[Operator Instructions] Your first question comes from Fred Taylor of MJX Asset Management.

I'm looking at Slide 9, which has the debt balances. Do you have the EBITDAs broken down by the 5 different borrowers for the quarter and the 6 months?

Yes. The silo-specific financials will get posted to our website a little bit later this month.

Okay. That's helpful. And how long do you think do you expect to continue borrowing in silos as opposed to perhaps doing a refinancing at the parent level?

Yes. Refinancing opportunities are always market contingent and capital markets contingent and contingent on performance of the business. We'll certainly going to evaluate any opportunity that might present itself in that regard, but it's dependent upon a lot of extraneous, as well as performance factors for the enterprise. We'll evaluate that as we move forward, but I don't have a specific timeframe for you.

Your next question comes from Colin Wilson-Murphy of Bowery.

I was wondering when you expect -- you anticipate cash starting to flow from SuperMedia to the R.H. Donnelley silo?

There's been some tax aspects of that already transpire as we made our second quarter cash tax payments and calculations, relatively small amount at that point. And then, of course, the movement of cash across all of the silos occurs as a result of the various sharing agreements, the cost-sharing agreements that are in place, but it'll move in a standard course. The primary movement I think that you're making reference to is between -- in regard to the tax aspect of it. We'll see smaller amounts as we move through the rest of the year, moving associated with the tax payments requirements at the SuperMedia silo. You'll probably see a little more of that as we move into next year.

[Operator Instructions] Your next question comes from Chad Quinn of Bennett Management.

Dee, I was wondering if you could remind me of what is the period over which ad sales amortize into revenue?

For the most part, it's a 12-month period. A few exceptions but fairly minor, but pretty much 12 months.

Okay. And earlier in the call, when Peter commented on the integration and merger being on track, does that mean that the synergy forecasts that were provided on the -- in the 12 6 deck, is that on track as well?

We're not necessarily updating the 12 6 deck, but I will say that from a cost perspective, we do believe we're on track to get out the costs that were going to result from the merger, as well as the ongoing cost reductions that we'd looked at individually. And we'll continue to look for additional opportunities in the cost buckets as we move through -- over the course of the next year or so.

Okay. And, Dee, when you said that you're not going to update those numbers at this time, are those numbers -- does that mean you think you're still on track to achieve those numbers or you're moving off those numbers? I know you said you're not giving guidance, but I'm just wondering, I'm just -- if you can clarify that, that statement about not updating the 12 6 forecast.

Yes. I mean, it's basically that. We're not updating one way or the other in regard to that plan of record at this point.

Okay. And then you mentioned the -- you have identified some performance levers to help drive the sales in the future. I was wondering if you could just maybe elaborate on that a little.

Yes. This is Peter. One, in the products, it's interesting that there's a lot of different products out there, and clearly, they're not across both footprints. And when we look at some of the channels that we have, Dex One had a telephone center, which as we look at our -- kind of we matched kind of the client sets and the opportunities out there, we look at the channels we have and we look at the products we have, we think that there's ways of combining those to be more effective in how we go to market. That's just one example, and there's other things with training. And while I think, as I look at the progress we've been the last year, it's really remarkable in the field how quickly the teams have adjusted to not only print but the digital world and how comfortable they are now, it really is remarkable. So there's a lot of opportunities between channels, between segments, between targeting and how we go to market in the bundles, where clearly, local businesses need to be able to get found in the digital world. And the more analysis and research that we've done, and the latest research has come out in 2013. It really confirms a lot of our thinking relative to how we approach these and execute going forward, using the different levers we have to pull.

Your next question comes from Tim Daggett of Citigroup.

Can you talk about your appetite for below par buybacks of the loans, and how much capacity you have, and when you might think about starting to do that?

Yes, I mean, we're evaluating that right now, still considering the -- making sure that we've got solid cash flow forecast and the elements so that we come out with -- to degree we do come out with over market repurchases, we do it with the right amounts and in a thoughtful fashion. But I would expect that to the degree we can get into the market and put some cash to work, that we would be looking to do that and in fairly short order.

The next question comes from Samuel Sekine of ALJ Capital.

Most of my questions have been answered. Just one on the print side. Can you talk about the trends just that you're seeing there? I mean, is it kind of trough? Or do you guys see that this negative 21.8% is kind of a go-forward rate?

We look at the print over the last couple of quarters and last few quarters, and we're seeing the negative 21%, negative 22%, fairly consistently. As we look through the rest of the year, I'm expecting that we'll probably see some similar results. As we move into next year and beyond, certainly we're looking -- we would like to improve that trend and work to improve that trend. As Peter mentioned, the bundle sales are an approach that helps retention and helps the delivery of the value proposition to the advertiser in a bundle concept. I believe that also has the potential to help some with print as we retain, not only more digital, but also more print. But we've got to see how that goes and how it moves. I think the most recent trends in the 21%, 22% range is probably what we're looking at in the near term.

Yes. Of that 21%, 22%, how much of that is due to pricing versus customer retention?

We talk about customer retention in the 80%, 85% range, and so you can kind of do the math as to the breakdown as to how much is decreased spend by individual advertisers. I wouldn't say it's necessarily just pricing. It's also the change in size of programs with customers you've retained and -- as well as some pricing pressure, as well as the discounting programs that we're putting in place around the various bundles. So all of those contribute, but like I say, we see it -- when you're looking at 15% to 16-type percent decline in clients that we've seen recently, you can do the math as to where the remainder comes from.

And lastly, are you guys seeing any increase in just digital-only customers? Or and what's the mix, I guess, between digital versus bundle and print only?

Yes. I would [ph] segregate the individual clients. What we're seeing though is that the opportunities that -- and the approach in the marketplace from the former SuperMedia markets, as we roll that across the Dex One markets, we would look to see a step up there because that was some measure that focused in the digital-only clients. That was some measure that focused on the SuperMedia approach in the marketplace. And then on the Dex One side, as we -- the former Dex One bundles and approach in the marketplace, as we roll that across SuperMedia markets, we would seek to improve the penetration of the existing client base. So you've got both of those dynamics moving. Certainly we're seeing increase in digital-only clients, but we still need to take an additional step in that regard, as Peter mentioned, with 3% to 5% new business growth. We need to take an additional step in that performance and some of the bundles and the approach in the marketplace we're looking to roll, we're hopeful will provide some assistance in that regard.

Your next question comes from Parker Lewis of Hayman Capital.

I just had a question about the merger transaction costs. I think it's in the $6 million [ph] in the financials. Have all of the cost specifically related to the transaction and professional fees been incurred to-date and paid?

Yes. It's -- there may be dribs and drabs, but for the vast, vast majority of the transaction costs themselves will have been paid.

Your next question comes from Jen Ganzi of Hillmark Capital.

Just -- I was wondering you mentioned in terms of the digital sales growth slowing that you had some weakness in the national channel in digital due to -- especially these companies working with the digital agencies. Can you elaborate a little bit on that, please?

Sure. On the national side, national customers actually are more sophisticated have more resources. And so the relationship we've had with many of our national customers has been through what we call CMR, certified marketing representative. They are really been the conduit, and the relationship was really more of a print-centric relationship. And national business, for the most part, isn't looking at a company like ours to say, "we're going to go take our digital to SuperMedia or Dex Media." And so the -- we're seeing CMOs in the national community as you might expect say, "we're going to be looking to do more digital," and we're not the provider of choice at this point. On the local side, we are seeing the bundles, and it's decreased because the penetration in the former Dex One markets, the penetration of the bundles has been terrific in the last year or so. But at some point, that just slows down as you convert your, let's say, the first set of customers in there. And now, the focus is going to be upselling those customers and converting the rest. So from a standpoint, that's kind of -- job #1 is to try and take as many of our existing clients, maintain that relationship, create bundles that allow them to do business with us and then track and show them the results and keep the high retention rates we have. In the meantime, we're working on other channels to go drive additional new business with more specific bundles targeted for different levels of customers. And so the combination of trying to drive more of the products across more of the different footprint. For example, the SEO product was in the Dex One footprint. It's not in the former SuperMedia footprint. And as we roll those out, we're going to -- we expect to see improvement in the ad sales.

And, Jen, I would say with respect to the national, we do see certain opportunities in pockets there where we can improve the trend now with respect to national. While national advertisers may not be looking at us to manage their search program or manage their Google program or those sorts of things, we do have a network of partners, including our own, owned and operated traffic, that does provide good leads and does provide good conversion. And there is an interest from the national client in regard to that base. We need to formulate and adjust product set and adjust approach to that market in that set of customers in a fashion to get at that interest and drive revenue opportunity in that regard. And we'll be looking to do that, along with other things like franchise opportunities and evaluating opportunity to greater penetrate the franchise space with those solutions as we move through the rest of the year.

Great. And I'm just curious, I don't know if you break it out, but maybe you could just give me a sense of what, I guess, sort of percent of your sort of old line print customers have converted to digital, and what sort of the growth rate has been over the last few quarters for those guys or you won't break or -- if you break those out?

Yes. No, we don't break out specific segregation at the customer level between the print and digital. We're obviously seeing increased improvement in the penetration levels of our existing print base with the digital programs, though we don't isolate those particular statistics.

Okay, so you don't know like what percent of like your original print customers have sort of migrated to digital at this point?

Well, we don't publicly disclose those elements. We're looking to provide total solutions here, and we do think that penetration of that print client base is going to continue, move and evolve in the right direction. We think that's the right thing for the client. We think that's the right thing for retention and all of those elements. When you look at the Dex One approach, as they move through 2012, they took a meaningful step in regard to penetration of their base. And we had a penetration of multiproduct base in the former SuperMedia side as well. As we cross-pollinate these, we would expect to see an increase in the penetration of that client base.

Okay. Great, and when you say that retention was like 85%, is that just on the print side or is that just overall print and digital?

No, we're talking in total with respect to our client base.

Okay. Great. And then just one more question on expenses. It seems that they've gone up on like sort of the an absolute basis from last, last year both in the quarter and the half. I was just wondering if you could elaborate on why that's the case because you revenue up on the quarter, but EBITDA down.

Yes. When you look at -- well, I think you're looking at the operating revenue from a -- you may be looking at the GAAP financials as opposed to the pro forma adjusted financials. So you need to focus more from -- to truly get a sense of the operations, you've got to focus on the pro forma adjusted results. The GAAP results are significantly impacted, especially in the revenue line, but overall as well because of fresh-start accounting and acquisition-based accounting that had to occur with respect to the SuperMedia piece of this transaction. So that in order to get a true sense of the operating -- the true operating results of the enterprise, you really need to look at the pro forma schedules. Those reconciliations are in the appendix and in the schedules. And a greater description of all of that accounting aspect of things and those impacts will come out in the Q in the next day or so.

Okay, so I'll look to that then.

All right.

Your next question comes from Stan Manoukian of Independent Research.

I have a very specific question about changes that you guys are making or not making in instructions and policies that you are recommending to your sales people or customer service representatives in light of declining digital sales. Are you recommending that they don't push bundles as hard as they used to? And to what extent do you see the relationships between the digital sales decline and Facebook prosperity? I mean, is there anything specific that drives this digital sales decline in your opinion, maybe competition or the fact that your client used to push bundles? What specifically, in your view, drives the decline in digital growth?

Yes, and let me take first crack at that, and I'll pass it to Peter. First, let me clarify that there is dollar amount and percentage growth in the digital revenue line for us and in the operations and in the sales results that we've reflected here. The growth rate itself has seen a decline in the first half of the year versus last year. I think Peter mentioned several elements of that in his opening remarks when he talked about national is causing a decline. I think that delineated some measure of that influence going on. Last year in 2012, we saw good growth as we built the base in the former Dex One markets of digital clients with that bundled approach in that approach in the marketplace. Obviously, the first year of that growth is going to be greater and more significant as you look at percentage growth. As we've moved into the first half of 2013, that rate of penetration has slowed. And then on the SuperMedia, former SuperMedia market set, we're actually seeing an improvement in the local sales and an improvement in the growth rate in the local sales there. The national is drawing that down a little more. As we look forward, our -- we'll still continue to push bundles. We think a multiproduct relationship with those advertisers is absolutely important. Peter mentioned we're going to cross-sell the respective product solutions between those markets, and so bundles will continue to be a very strong focus with the sales force as we move forward. And now -- and then it will also be about enhancing the value proposition inside of that bundle so that we can upsell with respect to the folks that have already purchased multiproduct solutions for us and then getting at the new business, getting that new business and enhancing the 3% to 5% that we're getting out of new business. Those are the elements that we'll look to push. But as far as direction and how we're driving that sales force, that has not been adjusted as to the product solution sets that are in their bag. We're actually looking to enhance that with more digital solutions, and what we're incenting them to do has not been an adjustment. I will say the second quarter probably did see some measure of distraction because of the transaction and getting the, as Peter mentioned, the "me questions" answered. But as we move forward, we'll be continuing to look to drive those multiplatform solutions across the customer base.

Right. And just follow up quickly, if I may. I understand that your salespeople have experienced some distraction because of the technical issues and merger and stuff like this. But looking forward, can you explain to us maybe possibly how precisely you're going to increase the penetration into a new customer base with the existing sales force? What specifically you are instructing them to do to approach new clients? Because it's obviously, it's easier sort of to reinstate revenues and renew them with existing clients and talk to people, to business managers with existing relationships with them. But getting to the new clientele with the same number of salespeople, I think it's kind of challenging. So maybe you can tell us what kind of tools they will be using and what specifically fuels your confidence that they will be competitive in their sales pitches?

Great questions. And, Stan, just so first we just -- and I think just trying to get you on board or help people understand what's going on. We've recently just put all of the management teams in place. The teams currently are working on the new approaches as we combine these 2 companies. And a couple of things. Segmentation will be a key driver of how we look at going forward, because you're right. We have to use our resources most effectively. So segmentation will be one and more targeting of our clients. We can't do things the way we did them yesterday. We all realize that. So the work that marketing is doing to make sure that we understand the opportunities in the different segments will be part of it. Second thing to think about would be the channels and what channels are more or less effective, given the identity of the segments that we talked about. So the channels and how we go through it with either, I'll say, the account executive-type manager who handles large complicated accounts down to the telephone centers where we can cover a lot of customers at a low end much more efficiently. And third, I would say that the -- one of the things that both companies have done is, they've done a lot of work in the last couple of years on the products and on the bundles. And when we look at these products and these bundles, by matching the right products to the right bundles and improving them with the right channels and with the right segments, we think that that's one of the ways that we can improve and lever the top line. So those are just kind of a high-level approach, but the teams are actually working on all that right now. And actually tomorrow, I'm going to get one of the readouts of where they stand towards our final plans. Good question.

Your final question is a follow-up from Colin Wilson-Murphy of Bowery.

I understand that the renewal rates, the overall renewal rates are between 80% and 85%, but what are the renewal rates for the bundled products and the guaranteed products?

We don't isolate those publicly by product set, but I will tell you that we see probably between 5% and 10% enhancement when we're selling a multiproduct solution as opposed to a single product solution to an individual client. Now you have to be careful with that as to the cause-and-effect aspect. But advertisers advertise and buyers buy, but we do believe and we do know that the value proposition that's delivered via those multiproduct solutions is enhanced when they're taken both platforms or the multiple platforms and multiple products that we offer. And that certainly contributes to the retention differential that we're seeing.

Okay. And how are the out-of-market trials going selling those digital products?

We have -- prior to the merger in the former Dex One, they had some out-of-market folks, but they had discontinued that channel prior to the merger. And at present, we have fairly limit -- very limited out-of-franchise efforts and activities. We certainly do have clients that are out of franchise that are wanting to advertise in our markets. But as a focus and as a separate channel or distinct effort, those elements have been discontinued.

This concludes today's question-and-answer session. Thank you for your participation in today's call. You may now disconnect your lines, and have a wonderful day.

Thanks, Paula.