As big market groups continue to outpace those in smaller markets, Cumulus Media is among the latter. It reported that Q3 revenues were up, but only by 3.6%.
“We continue to innovate the radio business model to achieve industry leading EBITDA growth. Our technology platform is driving increased efficiencies as our LTM EBITDA margins improved 100 bps to 31%. Our management systems are directing scores of new sellers generating thousands of new advertisers across our platform while keeping cost of sales in check. Our low cost of capital and expanding margins combine to enable us to generate considerable free cash flow to accelerate our de-leveraging” said CEO Lew Dickey.
Broadcast revenues from Cumulus Media’s own stations were up 3.6% in the quarter to $66.4 million. The management fee it received from Cumulus Media Partners, the privately owned larger-market group which it manages, rose 2.1% to just over $1 million. So, net revenues overall were up 3.6% to $67.5 million.
Cumulus continued to hold the line on station expenses, which rose only 0.8% to $40.5 million. Thus, station operating income (SOI) outpaced the revenue growth, gaining 8% to $27 million. Adjusted EBITDA rose 13.4% to $22.8 million. Free cash flow increased by over $3 million to just under $15 million for the quarter.
Meanwhile at the larger-market Cumulus Media Partners (CMP), revenues were up 6% in Q3, although the company does not make public the dollar figures. EBITDA was up 10%.
Looking at the current quarter, Dickey told analysts that October was up about 14% for Cumulus, with November pacing up 15% and December 7%.
For CMP, October was up 13%, with November pacing up 16% and 13% for December.
In his Q&A with analysts, Dickey acknowledged that large-market CMP is growing local more than Cumulus, which was basically flat for local revenues in Q3. “Our initiative in terms of driving local business and pushing rates across our platform have been such that we have turned down business and there’s been some local agency business that we have not taken as a result of trying to push our rates,” Dickey said.
RBR-TVBR observation: Rate discipline is tough when the economy is not yet robust. But taking a little pain in the short run, as business goes to cheaper competitors, is worth it in the long run. That’s especially true if you have dominant stations in the market, so those bargain-basement ad buys don’t work very well.