A Whole New Cumulus Enjoys ‘A Very Strong Quarter’


“It has been a busy 7 weeks since we last spoke, and we’re pleased to be reporting a very strong quarter today,” Cumulus Media CEO Mary Berner said Thursday to open the company’s first Q1 earnings call since emerging from debtor-in-possession status.

Net income was achieved. Net revenue was also up. As a result, so was its stock in midday trading on Friday.

Reflecting its emergence from bankruptcy, Cumulus’ financials reflect the successor company of today, compared to the predecessor company under Chapter 11 administration.

Comparing Q1 2019 to Q1 2018 shows Cumulus saw net income of $451,000 (2 cents per share), a big swing from the loss of $5 million (-17 cents) seen a year ago.

The third-largest owner of radio stations behind iHeartMedia and Educational Media Foundation saw its revenue grow to $267.5 million from $263.7 million.

Revenue increased 1.4% in the quarter, and Berner said this was driven by strength in Cumulus’ national businesses, both at Westwood One and in national spot at the station group.

There was also “tremendous growth” in digital, which maintained the acceleration of growth experienced throughout 2018 at Cumulus.

“That revenue growth, combined with continued rigorous expense management, resulted in EBITDA growth of 3.8% in the quarter [to $41.8 million],” Berner said.

While there was a “small headwind from political in the quarter,” it was not as much as what Cumulus will likely face later in the year.

Excluding political, revenue was up 1.6%, and EBITDA was up 4.7% for the quarter.

Radio division revenue slipped 1%, to $166.54 million, while WWO revenue was up 5.9% to $100.36 million, in Q1.

“Overall, these results reflect solid execution against the three strategic priorities we described for you previously,” Berner said. “First, enhancing operating performance, that is our ability to maximize EBITDA by improving our efficiency on the revenue side, primarily through pricing and inventory management and improvements in sales execution, and by aggressively, but thoughtfully reducing our cost profile. Second, growing our high potential digital businesses. And third, optimizing our asset portfolio by buying or swapping for assets that can help us obtain or expand market leadership positions or divesting assets that are noncore or in markets where attaining a leadership position may be challenging. The execution of those priorities is critical to helping us achieve our three key financial goals; generating as much as $100 million of free cash flow per year, reducing net leverage to below 4x as quickly as possible, and reinvesting in new opportunities with meaningful growth or valuation potential.”

Cumulus’ pricing and inventory initiatives continued to pay dividends in the quarter, Berner remarked.

“We now have nearly 90% of our revenue on the new traffic and billing system and this deployment, combined with the business analytics tools and revenue management organization we developed, have dramatically increased the insights we have into our pricing and sellout patterns and our ability to take action to improve the yield on our inventory,” she said. “While we are still in the early innings of what these capabilities can deliver over the longer term, in the quarter, we were also able to identify several opportunities that contributed incrementally to the top line, including the creation of custom networks and other products tailored to specific client demand.”

Meanwhile, Cumulus has emerged as one of the “top 5 largest podcast companies” in March, Berner said.

Then, there’s audio streaming of its radio stations. Cumulus is pleased with its partnership with a company Entercom ceased doing business with in 2018 to build out Radio.com.

“Our streaming audience is growing steadily, driven by both organic listenership and increased distribution on the TuneIn platform, and we’re monetizing this high-margin digital inventory better and more broadly through all of our channels: local, national, network, programmatic exchanges and remnant networks as well,” Berner said.

Cumulus’ local digital marketing services platform, C-Suite, is also maintaining “its very steep revenue growth trajectory to the tune of over 100% year-over-year revenue growth in Q1,” Berner added.

Lastly, there is Cumulus’ leverage. “Our trailing net leverage as of March 31, pro forma for the announced acquisitions, is down to 4.8x,” Berner confirmed. “As a reminder, in emergence from bankruptcy less than a year ago, we had a net average of 5.8x. So we’re very pleased with the progress that has been made to aggressively reduce leverage.”

What’s the Q2 prognosis?

Pacing is slightly negative, but essentially flat on an ex-political basis.

Berner explained, “It’s a bit noisy this quarter for us given all of our M&A activity, but this pacing number is essential on a same station basis, reflecting the operations that we will have going forward. Therefore, it removes the impact of the stations that have been sold to EMF, and also KLOS-FM, as well as WNSH-FM “Nash FM” in New York and Springfield, Mass., which are going to Entercom, and Bridgeport, Conn., which is going to Connoisseur. On the flip side, it includes the pacing for the Indianapolis and Allentown, Pa., stations from Entercom and Connoisseur. Our Q2 reported numbers will obviously be presented on a slightly different basis, but we’ll give the comparable same-station numbers at that time.”

During the Q&A portion of the Cumulus earnings call, Berner told B. Riley FBR analyst Zack Silver that Proctor & Gamble Co. spending “has been meaningful” with its network channels, and that more small advertisers are buying the network than was previously seen. “In the first quarter the total number of advertisers was up 18%,” Berner said.

Silver also asked about what Cumulus’ views are on possible radio industry deregulation by the FCC.

Berner said, “We certainly hope that they do take action necessary to loosen the ownership rules; we think it would be good for the industry and we think it would be good for Cumulus. In terms of how we react to it, we just think that it would open up possibilities for us to execute our portfolio optimization strategy to a greater magnitude. Right now it’s tough to find swaps today that lineup cash flow and where the trade on each side makes sense, and we think we’ve been very fortunate to find two of those so far. We’d hope to find more. Ultimately, our goal is to achieve market leading positions, No. 1 or No. 2, where we can, and if it makes sense to us, to exit where we can.”

As RBR+TVBR reported in February, San Francisco and Detroit could be markets in play for Cumulus, now that it is preparing to wind down in New York, sold KLOS-FM 95.5 to Meruelo Media, and has not yet announced if the intellectual property of Hot AC WRQX-FM “Mix 107.3” in Washington, D.C. will be retained and moved to WMAL-FM 105.9, or sold to Entercom, which could place it on WLZL-FM 107.9 or the 99.1 MHz frequency currently home to Bloomberg Radio.

Meanwhile, Cumulus’ big-signal AMs, which have largely fallen to record lows in the Nielsen Audio ratings, are reportedly seeking a buyer. What entity that may be remains the subject of rumors only.