Cumulus Media, Inc. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Revenue: Q2 revenue finished 2.5% below last year, but EBITDA was $25.2 million and cash from operations excluding exchange offer costs was $8.3 million.
• Digital Growth: Digital marketing services grew 24%, and digital businesses overall increased 5% year-over-year. Podcasting revenue continued to grow for the fourth quarter in a row.
• Expense Management: Fixed costs were reduced by $4 million in Q2, with a year-to-date total of $8 million, improving operating leverage.
• Balance Sheet: Completed exchange offer and ABL upsizing, extending maturities to 2029 and buying back sub debt expiring in 2026.
• Key Priorities: Progress made in driving digital revenue growth, expense management, and balance sheet fortification.

Segment Performance

• Digital Businesses: Digital businesses now account for 19% of total revenue. Digital marketing services (DMS) grew 24% year-over-year. Podcasting revenue increased for the fourth consecutive quarter. Streaming revenue declined due to an expiring fixed rate sales contract, but streaming impressions grew 25%.
• Broadcast Radio: National broadcast advertising had some improvement in categories like insurance, retail, and telecom, but overall revenue was down. Local spot revenue was down 4% year-over-year, but multimarket local broadcast revenue was up 65% year-over-year. Sports advertising remained strong, with NCAA basketball championships seeing revenue growth.

Guidance

• Q3 revenue is pacing down slightly.
• Capital allocation priority is debt reduction.
• CapEx guidance for the year is reduced to $25 million from $30 million.
• No material tax payments expected this year.

Risks

• Challenging advertising environment with soft demand.
• Macroeconomic uncertainties affecting advertiser spending.
• Dependence on political spending which can be variable.
• Impact of interest rate environment on consumer demand and advertising budgets.

Question and Answer

• Q: Thoughts on political revenue balance of year, especially with Harris in race? A: Second quarter political revenue was higher than 2020, but still low. Political spending may increase as races become more competitive, but most political revenue is from down ballot races.
• Q: Network business outlook with lower interest rates? A: Expect network to benefit from lower rates, but macro environment uncertainty about consumer demand remains; podcast business should also benefit as listenership growth leads to advertising growth.
• Q: Challenges in monetizing streaming and key verticals in DMS? A: Streaming revenue down due to expiring contract, but taking back inventory is strategic; DMS has key verticals like home improvement, automotive, HVAC/plumbing with tailored strategies.