Cumulus In Q2: A Tale Of Two Views

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When it comes to Wall Street and the investors in Cumulus Media, the company’s just-released second quarter earnings results will most certainly be viewed quite differently by two different camps each seeking the same ultimate goal: long-term revenue success for a leaner, better-managed radio broadcasting company no longer in the nation’s two largest markets.


On a same-station basis, the numbers don’t look so bad. But, will more focus be placed on the as-reported not-so-great overall results, considered the Wall Street standard?

If so, Cumulus and its leader, Mary Berner, could be in for a bumpy ride.

On a non-GAAP same-station basis, net revenue was statistically flat, moving to $275.9 million from $274.1 million.

Adjusted EBITDA was down 0.9%, to $61.5 million from $62 million.

However, when factoring in the stations no longer in the Cumulus family, overall net revenue fell by 2% to $279.7 million from $285.3 million.

Adjusted EBITDA dipped by 6.8% to $61.8 million from $66.4 million.

And now … the net income performance, and the reality of not having certain stations in the mix for Cumulus moving forward.

Net income for the post-bankruptcy reconstituted Cumulus was $42.86 million in Q2 2019, translating to $2.11 per diluted share.

In Q2 2018, the “old” Cumulus saw net income of $706.14 million.

Speaking on the company’s pre-Opening Bell conference call for analysts and investors, Cumulus President/CEO Berner briefly alluded to the company’s major divestments since its Q1 earnings call by noting that, cutting through that noise, the company reported a solid quarterly earnings report.

“In the second quarter, we continued to make great progress against the goals we set when we emerged from bankruptcy a little over a year ago,” she said, noting that the results “reflected our focus on financial goals and strategic priorities since emerging from bankruptcy.”

With a goal of reducing Cumulus’ leverage to up to 4x through enhanced competitive positioning, a multi-pronged profitable digital strategy and, of course, selling non-profitable assets, Berner reminded those on the call of Term Loan prepayments made in June and July. Thus far in 2019, some $250 million has been paid, reducing Cumulus’ debt by 20%.

Now, Berner said, Cumulus’ leverage stands at 4.8x.

“Given the results of the past year, I am more confident than ever that the company will continue to deliver significant value to our investors, employees, listeners, and advertisers,” Berner said.

That said, using cash on hand to pay down debt may be seen as a negative by some Cumulus investors. As of June 30, the company’s cash and cash equivalents was reduced to $20.5 million, from $27.58 million on Dec. 31, 2018 — a 26% drop.

And, while Cumulus’ Term Loan was sliced in half (51.4%, to be precise), to $603.74 million, it now has a half-million-dollar 6.75% Senior note payoff ahead.

Kicking off questions from analysts was a stand-in for Marci Ryvicker at Wolfe Research. Asking about the strongest and weakest categories in the quarter, Berner said telecom, financial and travel were the strongest advertiser groups. However, entertainment, home products and auto were the weakest.

Given the level of investment seen in weekly Media Monitors Spot 10 Radio reports for companies such as GEICO, The Home Depot and several auto dealer associations, that’s not good news.

NO REGIONAL DIFFERENCES?

The second query came from Boca Raton, Fla.-based Michael Kupinski, Director of Research and Managing Director of Media & Entertainment at Noble Financial Capital Markets, and he wanted details on regional trends at Cumulus.

Asked about regional activity, Berner replied that Cumulus operates in 87 markets, so the general corporate trend “is the result of inputs from many markets. There is no particular regional trend.”

Kupinski pushed ahead with his question, asking again if there was nothing standing out as particularly weak or strong.

Berner’s response: No, not regionally.

A question regarding ratings also came from Kupinski, who noted that Sports Talk format represent the “biggest challenge” for local revenue but that there is a nice trend on its Westwood One side of the business.

WWO is the national radio arm of Cumulus.

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