Q2 2025 CUMULUS MEDIA INC Earnings Call
Speaker #1: If , at 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 .
Speaker #1: These statements are based on management's current assessments and assumptions , and are subject to a number of risks and uncertainties , as discussed in our filings with the SEC .
Speaker #1: In addition , we also use certain non-GAAP financial measures . We believe this supplementary information is useful to investors , although it should not be considered superior to the measures presented in accordance with GAAP .
Speaker #1: A full description of these risks , as well as financial reconciliations to non-GAAP terms , are in our press release and SEC filings .
Speaker #1: 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 .
Speaker #1: A recording of today's call will be for about a month via a link in the investor portion of our website . And with that , I'll now turn it over to our president and CEO , Mary Berner .
Speaker #1: Mary .
Speaker #2: Thanks , Colin , and good morning , everyone . In Q2 , the broadcast revenue backdrop remained frustratingly difficult , with macro pressure by far the most significant driver of our total revenue decline of 9.2% , which was slightly better than the pacing guidance we provided on our last call .
Speaker #2: However , within that context , we continue to outperform our peers across several key metrics and to make progress in areas under our control , reflecting disciplined and strong execution and strategic investments , even in a capital constrained environment .
Speaker #2: Specifically , as measured by Miller Kaplan , we grew our revenue market share in all broadcast spot revenue channels , reflecting 11 straight quarters of ratings share growth in our PPM markets .
Speaker #2: Our emphasis on live and local programming , dynamic inventory management capabilities , and relentless focus on sales execution . We also grew our digital revenue market share driven by the standout performance of our local digital marketing services business , which was up 38% in the quarter .
Speaker #2: We continued to reduce costs , adding an additional 5 million of annualized costs , bringing the total to over 175 million of fixed cost reductions over the last five years .
Speaker #2: We significantly accelerated our use of AI to create both growth opportunities and business efficiencies across all functional aspects of the company . And we finished the quarter with 97 million of cash , inclusive of a 55 million draw on our ABL revolver , which provides us with significant flexibility as we look ahead .
Speaker #2: While we do not expect secular headwinds to abate in the short term , we do believe we will continue to outperform our peers in the areas we can control by continuing to execute our strategies to further leverage the company's core competencies and valuable underlying assets , which include our massive megaphone that reaches 92% of the country and 250 million listeners every month .
Speaker #2: Our ability to walk product into the door , as delivered by our almost 500 locally embedded sales professionals , our established relationships with approximately 30,000 local and national businesses who are natural customers for new products .
Speaker #2: We develop our multi-platform content engine that creates monetizable content in an almost endless variety of formats and our extensive , constantly growing library of premium audio content that can be redeployed and monetized in multiple ways .
Speaker #2: Turning to our second quarter performance . As I said , despite the market headwinds , there were some significant bright spots . First and foremost , digital , one of our key growth strategies continues to be a clear area of strength for us .
Speaker #2: Our digital marketing services business was up 38% year over year , and acceleration of the 30% growth it delivered last quarter and a massive outperformance growing at a rate that was nearly double our radio peers and more than four times the rate at which the digital ad market is expected to grow , according to a recently published PwC report .
Speaker #2: This performance is even more notable because it comes off a meaningful base of revenue , an annual run rate of nearly 80 million , achieving that level , concurrent with nearly 40% growth , reflects the success of the strategic plan we put in place several years ago .
Speaker #2: That plan keys off our ability to seamlessly leverage the tens of thousands of client relationships maintained by our local sales force to sell a curated set of digital marketing services products in combination with our owned broadcasting and digital audio audiences .
Speaker #2: Further , our DMs solutions deliver ROI for our clients that outperform industry benchmarks by an average of around 25% . Top of that , we've made multiple significant organic investments in this business over the years , including the ramping up of our digital sales organization , training , operational execution teams , product capabilities , partnerships , and marketing .
Speaker #2: These investments , along with strong sales execution , are fueling and will continue to fuel our achievement of record levels across important KPIs , including total customers and average campaign order size .
Speaker #2: Additionally , we've nearly doubled the percentage of our radio broadcast customers who also buy DMs with plenty of runway still remaining . We remain bullish about the prospects for this business , and we now expect it to surpass 100 million run rate early next year with increasing contribution margins as economies of scale start to kick in .
Speaker #2: Our other digital businesses , which include streaming and the Cumulus Podcast network , also continued to perform well , though there is some noise in their results , driven in particular by comparison issues in podcasting .
Speaker #2: Normalizing for The Daily Wire and Dan Bongino comparisons year over year , podcasting was up over 30% , and with that same normalization and including our 38% year over year DMs growth .
Speaker #2: Total digital revenue for the quarter was up 20% . Moving to our broadcast business , advertising headwinds , particularly among national advertisers , continued to impact both our spot and network revenue .
Speaker #2: However , as I highlighted earlier in the markets in which we compete , as measured by Miller Kaplan , we gained market share once again in the quarter .
Speaker #2: With respect to our local spot outperformance . We believe a key contributor to this is our strong focus on having a live and local presence , even in today's fragmented media environment .
Speaker #2: The strong relationships created by our trusted on air personalities not only build enduring audiences , but in addition to Spot , also provide highly effective , incremental opportunities for revenue generation from endorsements and sponsorships .
Speaker #2: As mentioned on previous calls, the impressive performance of our multi-platform product beyond the home market continued in Q2, with revenue up over 60%.
Speaker #2: This product leverages the scale of our platform and nationwide sales force to deliver multi-market multi-product buys for large regional advertisers . From a national perspective .
We are also training our entire sales force on how to effectively use AI to craft pitches. Generate spec creative developed, valid business reasons for engagement conduct combat competitive analysis, and finetune packaging, and pricing as the use of AI becomes more ingrained in our daily business operations. We're excited about the long-term opportunities it can unlock for additional value creation.
In the short term, though.
Given our high leverage. We are obviously operating in a capital, constrained environment. And as a result, we're limited to investing in those strategic opportunities, where the ROI is almost immediate.
That said, we entered the quarter with 97 million of cash, which included a 55 million draw on our abl facility that occurred during the quarter.
This draw will help us maximize optionality and flexibility.
Additionally we have nearly 14 million of non-core asset sales comprised of either land or small stations currently under Loi or APA which we expect to close by the end of this year.
The uncontrollable Market, headwinds have persisted longer than any of us would have hoped and will likely continue to pressure broadcast Revenue. That said, we have a track record of outperforming the market in that context by aggressively but thoughtfully, mitigating declines through cost, reductions
Seating meaningful growth opportunities such as with our digital marketing Services business, and embracing opportunities for long-term transformation which AI will help to accelerate.
We've done all this organically while burdened by high leverage. Despite that
Throughout a lot of Challenge and change our most recent culture. Survey delivered the highest response rates in the last 4 years and produce some of the highest scores we've ever had with 93% of employees, proud to work for cumulus 86% having confidence in leadership, 83%, excited for the future.
In addition. Additionally, our 2025 proxy results. Reflect our deep engagement with shareholders and changes made in response to their feedback, which resulted in a 90% plus average for vote for our board members and 85%. Um, Plus for the say on pay vote a significant rebound, from disappointing results in our 2024 proxy, we appreciate the support of all of our stakeholders and we remain confident in the value of the core assets of the company, and our ability to serve listeners, and customers, and drive new areas of growth.
With that, I'll turn the call over to Frank. Frank.
Thank you, Mary.
In the quarter, total revenue was down 9.2% slightly better than the pacing commentary that we gave in our last earnings call and down 5%, excluding political the impact of the daily wire and then 1 go comparison.
Evo, for the quarter was 22.4 million.
Digital Revenue was up 20%, excluding the impact of the loss of daily wire and Dan, banjo with our DMS business, continuing its strong growth. Trajectory up 38% in Q2 and currently pacing up more than 35% in Q3.
Further, DMS Revenue. Now represents approximately 50% of our total, digital Revenue,
From a broadcast category category perspective, travel and financial are best performing categories and spot, and farmer, and insurance. For some of our best. And network of note, as mentioned in the second quarter, the lack of meaningful sports program that has been a competitive strength for us in addition to weak, national demand in the previously mentioned comparison items impacted the network which was down approximately 20%.
With moving to expenses, till expenses in the quarter, decreased by approximately 16 million year-over-year, reflecting lower variable costs and ongoing cost reduction efforts partially offset by higher expenses associated with the growth in our DMS businesses.
The second quarter, we executed 5 million of annualized, 6, cost reductions adding to the 170 million of fixed cost. Reductions we've taken out since 2019 and as mentioned in our last earnings call
Resulting from the 2024 exchange offer which will be advertised over the term of the debt.
These amounts include the 55 million, abl draw that we made during the second quarter.
The abl draw should not have a material impact on cash flow as a borrowing rate for the draw is only slightly higher than the rate we're earning on deposits.
Second quarter capex is 5.5 million and we now expect full year capex to be below the 22.5 million guidance that we mentioned on our previous call.
Additionally, we expect to generate nearly 14 million of non-core assets, sales by the end of the year.
Looking ahead, we're currently paying down low double digits in total and down at approximately mid single digits X political X, daily wire and that is the Bono impact.
as as a reminder, in Q3 of 2024, we had total political Revenue, 4.4 million
with that. We can now open the line for questions, operator.
Thank you at this time. We'll now begin. Today's Q&A session. If you would like to ask a question, please press star. Followed by 1 on your telephone keypad.
For any reason you would like to remove your question please press star followed by 2.
At this time, the first question will be coming from the line of Michael cupin ski with Noble, Capital markets, you may begin.
Thank you. I have a couple of quick questions. Um, in terms of the pacings, I was kind of hoping that, you know, given the increasing likelihood that there might be some sort of rate, uh, interest rate reduction, um, as we go possibly into September. So I was kind of hoping that we might start to see some improvement in National advertising, which kind of tends to be a little early cycle and tends to kind of look forward that. I was wondering if you kind of look into the third quarter. Do you see Nationals pacing?
Improving through the quarter and specifically, as you kind of look to September, it was just wondering how the pacing kind of looked up per per month in the quarter.
Michael, I'll take that question. Um,
and very good question.
You know, we've been continuously saying that. As you as you mentioned, that a lower rate environment should generally be good for all advertising channels.
But we've been waiting for quite a bit of time for that to happen.
And then the nature of national advertising. As you know, can be very lumpy and is very Lumpy.
And so, in fact, we're not seeing any Improvement in pacing at this point, but, um, things can change pretty quickly. But as, as we're sitting here right now, there hasn't been a significant difference.
Gotcha, and obviously Nationals such as a significant portion for you that that turn to be quite significant. So, um, in terms of just in there, there has been a general decline in referral, search engine traffic, and I was just wondering, if you can talk a little bit about your digital marketing uh Services business and if you're seeing any um issues related to um that in any way, or if if not, do you expect that? It could have a problem. Um and if you could just talk a little bit about maybe what your exposure might be to the prospect of seeing referral search engine traffic Decline and what the impact might be on your businesses.
Yeah, I mean I'll take that good morning Mike. Um
Referral a search is, is a very, very small part of our digital business. Um, and so, as such um, you know, as as it becomes more pressured as it changes, um, there will be some impact, but generally, we have, um, you know, our our digital marketing Services business is
Um, allows them to, you know, Target we do a lot of Geo targeting other other things that um, we're not dependent on search. So, um, and then our boost product, which is, um, a presence products is not affected at all.
So could it um, decrease the number of eyeballs on sites and so forth. And possibly decrease the ROI that you deliver for your customers on, on your DMs business.
Yeah, I mean I think that's certainly could. Um, but I think we're, you know, we're aware of it and we are always fine-tuning. How do we go to market and what the products are and how they work together?
Um, so yeah, I could, but I think we've, you know, we have a...
A very good track record of, you know, optimizing any kind of campaign, and so we'll continue to do that.
Thank you and just 1. Final question in terms of just advertising categories, it was just wondering if you can, uh, talk a little bit about some of the key key key categories. Are there any particular green shoots that you're seeing? That might kind of give you a little hope that maybe things kind of stabilizing a little bit, maybe show signs that there might be some, you know, some improvement going forward.
Um,
so with the growth of DMS of close to 40%, you can tell that things are working extremely well.
And that's working in terms of the number of clients were getting in. The average pricing, uh, the penetration of their existing clients and then the benefits of new clients buying radio. So, for example, or attachment rate with existing clients close to 20%,
Close to 28%. Of clients are buying digital. Only are now buying radio.
We offer a multi sweep of products. So to your point as Mary mentioned, search is 1 component of that.
But we will look at our Runway and our pacing and we continue to be, you know, really bullish on that business.
Uh, moving to the categories, um, our top 5 categories.
In broadcast, spots are Professional Services Home Products, Automotive Financial and entertainment.
In total that represents property 55 to 60% of our business.
In a general weak environment. I mean even though we're seeing slight Improvement and local spot versus National
It's still down and that's reflecting their pacing, you know, 1 of the things that impacts our business. Particularly in our small markets is uh, the continued decline in automotive, which we are getting some benefit in digital. Um, but uh, to your point in terms of lower interest rates so we get lower interest rates and that stimulates demand and categories like Auto we'll we'll really
Well, lever to that and we should benefit from that.
Thank you for the caller. That's all I have. Thank you.
The next question is from the line of Patrick Shaw with un.
Unified company and female users. You may begin.
Hello.
Uh, okay, we can hear you. Um, yeah.
Okay. Uh, I was wondering on the digital side, if you could, uh, maybe talk a little bit more on, uh, podcasting. And I think you said rough, uh, talk about the growth there. Excluding the, the Lost relationships is that due to Bringing on additional podcasting or is that mostly kind of just organic to the existing um, footprint of of shows.
Yeah, um, good morning. Uh, you know, we generally Drive growth in 3 ways. Um, first is we we add new shows. Um, the second is, uh, through strong execution to capture at audience growth, you know, across both audio and video. And then, third is a strong execution um including uh multi-platform add packaging of the of the podcast inventory. So we put it in broadcast buys. Um,
So, we're seeing growth, many of our top shows, continue to see, uh, Impressions growth. Uh, we have the Sean Ryan Show, uh, which continued with really impressive audience, growth of, you know, tens of thousands of new followers in Q2. Um, Benny, the Benny show, which is another 1 of our top cap, uh, podcasts in Q2 made it to the top 30. Um, and then we've got a bunch of new ones including some of our, um,
some of our local, uh,
you know, for example, the ticket. So, um, looking ahead, you know, we, we believe that we will continue that growth, um, you know, adjusted for the
the kind of the the 2 items we've talked about cons, you know, several times
Okay, um, and then just on the expense side. Um, you you provide additional uh color on the the fixed cost reductions. I was wondering if you could just talk about the
Um, the pace of, uh, Opex to client that you had in Q2, if that sort of is like the, it would be a, how, how would you think about that flowing through the for the remainder of the year?
Well, as you know, um, we continue to be very very focused on on our cost structure.
Uh, regardless of the revenue environment.
Part of the benefit that we had in the second quarter in terms of costs.
Um, is that um some of the actions that we took last year benefited, the second quarter. So with a total reduction of expenses and the second quarter approximately 10 million of that was fixed costs. And then, as I mentioned, we're adding on top of that.
Um, we always have contract renewals, we'll look at to see whether or not we need those contracts.
Or whether or not we can get better terms, we always look at our our inventory at the network to see what the opportunity for that Revenue opportunity is versus the cost.
We're not going to be focused on continued business optimization, which uh, will not only help us in the Top Line we believe, uh, but also in the cost side.
so in it's a long way of saying that we continue to be focused on that and um,
And there are always opportunities. Uh, but again having taken out 175 million of fixed costs.
Since 2019 is a big number and the incremental cost savings after that.
um, will be more should be more modest, but time will tell
Thank you.
At this time, I'll pass the callers back over to the management team for any further remarks.
um, we appreciate everyone being in the call and we look forward to uh
meeting with you at the next call. Thank you.
Thank you. All this. Now, concludes today's conference call, we appreciate your participation. We hope you have a wonderful day. And at this time, you may now disconnect your line.