雅虎香港財經 Cumulus Media Inc. (NASDAQ:CMLS) Q1 2024 Earnings Call Transcript
Cumulus Media Inc. (NASDAQ:CMLS) Q1 2024 Earnings Call Transcript May 3, 2024
Cumulus Media Inc. beats earnings expectations. Reported EPS is $-0.84829, expectations were $-1.33. Cumulus Media Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Cumulus Media Quarterly Earnings Conference Call. I'll now turn it over to Collin Jones, Executive Vice President of Strategy and Development and President of Westwood One. Sir, you may proceed.
Collin Jones: Thank you, operator. Welcome everyone to our first quarter 2024 earnings conference call. I'm joined today by our President and CEO, Mary Berner; and our CFO, Frank Lopez-Balboa. Before we start, please note that certain statements in today's press release and discussed on this call may constitute forward-looking statements under federal securities laws. Actual results may differ materially from the results expressed or implied in forward-looking statements. These statements are based on management's current assessments and assumptions, and they are subject to a number of risks and uncertainties as discussed in our filings with the SEC. In addition, we will also use certain non-GAAP financial measures. We believe the supplementary information is useful to investors, although it should not be considered superior to the measures presented in accordance with GAAP.
A full description of these risks as well as financial reconciliations to non-GAAP terms are in our press release and SEC filings and that press release can be found in the Investor Relations portion of our website and our Form 10-Q was also filed with the SEC shortly before this call. A recording of today's call will be available for about a month via link in the Investors portion of our website. With that, I'll now turn it over to our President and CEO, Mary Berner. Mary?
Mary Berner: Thanks, Collin, and good morning, everyone. This morning I'm very pleased to let you know that we've refinanced our capital structure to secure five-year maturities with very favorable terms through a successful debt exchange and ABL facility upside and extension, which is an excellent outcome for the company given the generally difficult financing environment for legacy media companies. Specifically, with the completion of these transactions, we have extended maturities to 2029, reduced the principal amount of debt outstanding by approximately $33 million, secured attractive interest rates, maintained covenant like terms and increased our ABL facility availability by 25%. Importantly, by addressing the 2026 maturity wall, we now have considerable additional runway with which to continue executing against our strategic, operational and financial priorities, including accelerating digital growth through ongoing investment, particularly digital marketing services, reducing fixed costs to further enhance our operating leverage, which will be a big benefit to us as broadcast radio demand improves and continuing to reduce debt to delever.
Since our last call, in parallel to refinancing our debt capital structure, we continued to make considerable progress against these priority areas with the benefit of that progress reflected in our Q1 results. In Q1, in line with pacing guidance, total company revenue was down 2.7%, which represented a marked improvement from 2023 trends, and EBITDA was $8.4 million. Overall, digital continued to be an area of strong growth, increasing 7% year-over-year. Once again, our digital marketing services revenue was a lead growth driver, up 25% in the quarter, clearly demonstrating the positive impact of the investments we've made to date. These investments included the expansion of our digital sales force to capture more of the growing DMS space and the ramp up of Cumulus Boost, our portfolio of presence products, which serves as a low price entry point for advertisers who are new to the company.
And as two thirds of our originally Boost only clients have added broadcast radio or other digital products to their buys, the benefit of the boost strategy are compelling. Our digital results also reflect our differentiated go-to-market strategy, which centers on a versatile and well-connected feet on the street sales team offering a suite of digital audio and digital marketing solutions. Our ability to walk this full product set into the customer's door continues to pay off as our customers value the personal relationship and our salespeople's ability to tailor and adapt solutions that fit their particular business needs while remaining responsive to the continually changing dynamics of the digital ad market. This approach is yielding impressive increases in both new clients and the proportion of formerly radio only clients who now buy digital products as well from us.
Specifically, in the first quarter, we increased total DMS customers by over 25%. Additionally, we drove a 12% improvement in the percentage of our previously radio only customers who now buy DMS as well, and we continue to see the ability to upsell these legacy advertisers as a very large opportunity. While we're still in the early stages of executing our DMS growth plan, we remain very bullish about this strategy. Our other two digital revenue streams, podcasting and streaming, also grow in the quarter, up low single digits year-over-year. Podcasting revenue performance continued to improve sequentially on a quarter-over-quarter basis. As we mentioned on our last call, first quarter streaming revenue was impacted by the expiration of a third party fixed rate ad sales contract.
However, we remain confident that taking back sales responsibility for our station streaming inventory is the smart move, both strategically and financially, especially given our successful experience with taking control of the NFL streaming inventory two years ago. In fact, by applying the same approach that drove our success with the NFL stream to the management of our NCAA streaming rights, we increased our streaming affiliates by almost 60% during March Madness and the Final Four run. In aggregate, despite the difficult comp from the expired sales contract, our streaming revenue grew in the quarter, an indication that our new streaming strategy is working. Moving to broadcast radio the Q1 trends in our national spot and network business significantly improved from 2023.
In aggregate, these two national businesses were down mid-single digits during the quarter. As a reminder, our national spot revenue is embedded in the spot revenue line in our earnings press release, and the combination of it and network revenue makes up about approximately 50% of our total broadcast revenue. Spending by advertisers in certain key categories, including consumer packaged goods and insurance, continued to show meaningful growth, in insurance, specifically a top vertical within the financial category, which is a top five category for us. We are encouraged by the return of several large clients who sat out most, if not all, in 2023. Additionally, we saw strong increases in the food and restaurant, pharmaceutical and retail categories, as well as a heightened interest in live sports given its strong listener trends.
As mentioned, on our last earnings call, we booked the most revenue ever for the Super Bowl, and after that we achieved similar levels of success with the NCAA men's and women's March Madness championships. However, despite these positive indicators, the recovery in national advertising remains very choppy as advertisers across several key categories, including mortgage, banking and home improvement, continued to cite the overall interest rate environment as a significant obstacle to spending. With respect to local spot, while still down the revenue performance improved from Q4 2023. Given historical trends, we would expect that local broadcast radio, which did not drop off as quickly and as significantly as our national radio broadcast revenue, will see a recovery that is more gradual and muted than the rebound we may be starting to see in national.
Regarding political, revenue for the quarter was $2.2 million, down 55% from 2020, reflecting less competitive presidential primaries. Looking ahead, national advertisers are continuing to voice a desire to increase spending, but many still cite the uncertain macro environment as an impediment to a consistent return to more normal spending patterns. Further, as we saw in the first quarter, both local and national broadcast clients continued to book quite late, reflecting their lack of visibility into the course of the economy. With that backdrop, our revenue is currently pacing down low single digits for Q2. In this context, we remain acutely focused on disciplined expense reductions. In Q1, results included approximately $4 million of fixed cost reductions versus the prior year, which was on top of the $120 million or 26% of our total fixed costs we had already taken out since the pandemic through the end of 2023.
We've significantly improved the operating leverage of the company, which will drive EBITDA growth as the advertising environment continues to recover, and reducing expenses across multiple facets of our business continues to be one of our primary operating goals. To wrap up, I want to emphasize that given the continued uncertainty of the advertising outlook, our successful completion of what is effectively a full capital refinancing was a critical step and a big achievement for the company. Again, we extended maturities to 2029, reduced the principal amount of debt outstanding by approximately $33 million, secured attractive interest rates, maintained covenant like terms, and increased our available ABL liquidity by 25%. Our new capital structure provides us with additional time and flexibility to execute against our key business priorities, celebrating digital growth, reducing fixed costs and continuing to delever our balance sheet, each of which is foundational to our ability to build long-term shareholder value.
And with that, I will turn it over to Frank.
Frank Lopez-Balboa: Thank you, Mary. Revenue in Q1 was $200 million, down 2.7% year-over-year, consistent with the pacing guidance from our last call. While still a decline, it represented an improvement versus 2023's performance. These results were driven in part by better trends within our broadcast business, particularly those tied to national advertisers as well as growth in digital. Within digital, digital marketing services, revenue grew 25%, while podcasting and streaming each increased low single digits. From a category perspective, consumer packaged goods, insurance and pharmaceutical were top performing key national categories, while our weakest were mortgage, home improvement and banking. In local spot, home products and general services were our best performing categories, while professional services and retail were our weakest.
We generated $2.2 million of political revenue in Q1 versus $4.9 million in the same period of 2020, with a decrease reflecting less competitive presidential primaries this year. However, given what is shaping up to be a heavily contested general election accompanied by a large number of down ballot races across our footprint, we're expecting robust political revenue in late third quarter and fourth quarter. Moving to expenses, total expenses in the quarter decreased by approximately $4 million year -over-year, largely driven by fixed cost reductions partially offset by higher variable expenses associated with a shift in revenue mix. As always, we continue to focus on disciplined cost reduction to improve operating leverage, which will benefit EBITDA as the advertising environment continues to recover.
Turning to the balance sheet, as Mary mentioned, with the completion of the exchange offer, we reduced debt outstanding by $33 million, extended approximately 97% of our maturities to 2029 from 2026, secured attractive interest rates and maintained covenant light terms. Following the exchange, we have only approximately $22 million of debt maturing in 2026, which is very manageable. The exchange will not result in cancellation of debt income for tax purposes. Additionally, we completed an amendment of our ABL facility which extends the existing maturity to 2029, increases the facility to $125 million from $100 million for the same interest rate terms. In combination, the completed exchange offer and the amended and extended ABL facility provide the company with the ability to focus on our strategic, operational, and financial objectives, including debt reduction, which remains our priority.
Looking ahead to the second quarter, while we're seeing an increase in demand from advertisers in select categories, the uncertain macro environment continues to weigh on many others. As a result, total company revenue is currently pacing down low single digits. With that, we can now open the line for questions. Operator?
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