Cumulus Media, Inc. Q3 FY2023 earnings call

• Revenue and EBITDA for Q3 met expectations, with a dichotomy between local and national performances.
• Digital revenue increased by 7%, with streaming, podcasting, and digital marketing services all growing.
• Executed $5 million of annualized fixed cost reductions, bringing total fixed cost reductions since 2019 to $110 million.
• Completed a $10 million non-core asset sale and retired over $5 million face value of debt.
• Local businesses were more insulated from macro ad pressures, though auto category was impacted by strikes.
• Digital Marketing Services grew mid-single digits, with a tripled digital sales force since the last earnings call.
• Continued to reduce debt, with total debt at $676 million and net debt at $593 million since the beginning of last year.
• Board of Directors authorized a new $25 million share repurchase program, but near-term focus is on debt reduction.

In the third quarter, revenue and EBITDA met expectations. National advertising was soft, leading to an overall revenue decline. National businesses account for approximately 45% of total revenue. Digital revenue increased by 7%, with streaming, podcasting, and digital marketing services growing during the period. Local businesses were more insulated, but local spot broadcast revenue was down about 7% in Q3. Digital Marketing Services grew mid-single digits, driven by subscriber growth in Cumulus Boost. Third quarter revenue was down 11%, with local businesses outperforming national on a relative basis. Digital businesses, including podcasting, saw growth, with podcasting returning to growth after a decline in the first half.

• Q4 revenue is pacing down in the low double digits due to ongoing national advertising weakness and tough political comparison.
• Cautiously optimistic about improvement in the advertising environment in 2024.
• Focus on debt reduction as part of near-term capital allocation efforts.
• Board authorized new $25 million share repurchase program, but priority is on reducing debt.

• Macro environment uncertainty impacting national advertising spend.
• Weakness in professional services, financial, and insurance categories within national advertising.
• Impact of strikes on the auto category in local markets, affecting local spending.
• Tough political revenue comparables in Q4, with lower political revenue compared to prior year.

Q: Can you talk about where you're taking the cost out?

A: Areas include real estate, external contractors, and renegotiating contracts to achieve efficiencies without impacting revenue.

Q: Thoughts on digital marketplace rebounding and digital performance into 2024?

A: Digital marketing services are vibrant, grew mid-single digits, with a tripled digital sales force, and the company is bullish on its growth trajectory for 2024 and beyond.

Q: Mix change in digital businesses (podcasting, digital ad sales, digital marketing services)?

A: Digital marketing services is the fastest-growing part of digital businesses, with the mix still roughly one-third each, but expected to become the largest part over time.

Q: Impact of economy on digital marketing services?

A: Not significantly affected, as it focuses on small and medium-sized local businesses with a recurring revenue model, and there's always growth from new businesses starting.

Q: Podcasting growth and margins?

A: Podcasting returned to growth after a decline in the first half, with margins in the 20s, using a low-risk revenue share model.

Q: Debt prepayment and capital allocation?

A: Focus is on debt reduction, with a $5.2 million discounted prepayment of term loan to offset excess cash flow sweep, and near-term capital allocation prioritizes debt reduction over share repurchases.