Earnings Preview Primes Cumulus For Positive Debtholder Discussions


Set your alarm and perk the office coffee pot early on Thursday, Nov. 9. That’s because Cumulus Media has set an 8am Eastern conference call with Wall Street investors to discuss its official Q3 2017 earnings results.

The No. 2 radio broadcasting company by station count on Thursday morning released “selected preliminary operating results” for Q3, however, and it sends the message to all — namely its debtholders — that President/CEO Mary Berner and her team are working hard to make progress at a company that’s excessively overleveraged.

For the three months ended Sept. 30, Cumulus expects to report flat net revenue in a range of $286 million to $288 million. This compares to net revenue of $286.14 million in Q3 2016.

But, will it enjoy net earnings or suffer a net loss in Q3? We don’t know.

As of today, Cumulus could see anywhere from a net loss of $300,000 to net income of $1.7 million. While Q3 2016 net income came in at $46.3 million, it is important to note that the quarter was positively impacted by some $94 million thanks to the sale of its former home on La Cienega Blvd. in Culver City, Calif. —the home of KABC-AM and KLOS-FM for some 50 years.

Additionally, adjusted EBITDA is expected to fall into the $60 million-$62 million range. That’s a 36.7% improvement from Q3 2016.

It therefore stands to reason that Cumulus, under Berner, is plowing ahead in its long-term debris removal program created by previous leadership as it seeks to further restructure its finances and work with those it owes billions of dollars on an amicable solution.

When adjusting for the impact of $14.4 million of one-time expenses in Q3 — related to the resolution of disputed syndicated programming and inventory expenses with CBS Radio and Cumulus’ Westwood One arm — adjusted EBITDA performance in the quarter is expected to show 3%-6% year-over-year growth.

“The strong preliminary results for Q3 provide further evidence that our turnaround plan is taking hold,” Berner said. “We are encouraged by our continuing operating and financial momentum in the face of negative industry trends.”

She added that this marks the second consecutive quarter of year-over-year growth in revenue and adjusted EBITDA.

The news was largely welcomed by Wall Street. Just 15 minutes after the Opening Bell on Wall Street, Cumulus’ shares catapulted 35.5%, to 43 cents. While that’s far below the necessary minimum trading level for the company to remain on Nasdaq, Cumulus is appealing a ruling by the exchange that would see its shares bumped off, and heading to an Over-The-Counter (OTC) market.

Meanwhile, there should be no concern that Cumulus is unable to continue its day-to-day operations due to its financial health, which Berner addressed head-on in prepared comments.

“While the company has ample cash to operate our business, Cumulus continues to be constrained by an excessive debt load,” she said. “With the assistance of outside advisors, we are proactively exploring a range of alternatives with our lenders and noteholders to restructure the balance sheet and reduce debt.”

She added that Cumulus’ objective is to be able to redirect more of the company’s time and resources to where they can have “the greatest impact” on Cumulus’ future — “investing in our employees, in key technologies, and in initiatives that drive growth.”

The preliminary operating results are just that — preliminary. Therefore Cumulus cautions “not to place undue reliance” on the numbers.

By 9:58am Eastern, Cumulus shares were up more by 100%, to 64 cents.