CumulusStacked2019

Calling current radio station ownership limits “outdated,” Cumulus Media CEO Mary Berner told investors during the company’s first-quarter 2019 earnings call Thursday that loosening the rules would “open up possibilities for us to execute our portfolio optimization strategy to a greater magnitude.”

Discussing the potential of the FCC potentially updating ownership rules for broadcasters, she added, “We certainly hope they do take action necessary to loosen the ownership rules; we think it would be good for the industry and we think it would be good for Cumulus.” Asked during the Q&A portion of the call whether she considered Cumulus more in buyer mode or seller mode, she responded, “In terms of how we react to it, it's tough to find swaps today that line up cash flow and where the trade on each side makes sense. We’ve been very fortunate to find two of those so far and we hope to find more.”

Berner, of course, is referring to the company’s recent concentration of deal-making, including last month’s $43 million sale of heritage Los Angeles rocker KLOS (95.5) to Meruelo Media; and its trade of country WNSH New York (94.7), AC WMAS-FM (94.7) and country “Nash Icon” WHLL (1450) Springfield, MA to Entercom, in exchange for hot AC “107.9 The Mix” WNTR, sports WXNT (1430) and CHR WZPL (99.5) Indianapolis. Cumulus also agreed to trade two stations in Southern Connecticut to Connoisseur Media in exchange for four stations in and around the Allentown-Bethlehem, PA market.

“Ultimately, our goal is to achieve market leading positions number one or two where we can, and if it makes sense, to exit where we can't,” Berner said during the Thursday afternoon call. “There is not a stated goal one way or another as to whether we are more of a buyer or a seller of stations; it's really a portfolio optimization strategy.”

During the quarter ending March 31, 2019, Cumulus reported total revenues of $267.5 million, an increase of $3.8 million or 1.4% from Q1 2018. Excluding political, the company was up $4.2 million or 1.6% from Q1 2018. Total expenses increased $2.3 million or 1% from Q1, primarily driven by costs in its digital businesses and at Westwood One. As a result, consolidated EBITDA for the quarter increased $1.5 million or 3.8% from Q1 last year. Adjusting for political, EBITDA grew by $1.8 million or 4.7% in the quarter.

The Cumulus Radio Station Group experienced a “tough local spot market environment, partially offset by strength in digital and national revenue,” explained Cumulus CFO John Abbot during the investor call. Total revenue for radio slid $1.7 million or -1% to $166.5 million from first quarter last year; excluding political, station group revenue was down $1.3 million or 0.8%.

Station group expenses were essentially flat with “higher costs associated with higher digital revenue, offset by continued cost savings realized against contracts that were renegotiated or terminated over the last year and lower personnel related expenses,” Abbot said. Cumulus also endured cost pressure from rent increases and “a fresh start counting from our bankruptcy last year.” The combined impact of the revenue and expense changes yielded a station group EBITDA decrease of $1.8 million or 5% in the quarter and a decrease of $1.5 million or 4.3%, excluding political.

Berner: ‘We’re Pleased’

“We're pleased to be reporting another strong quarter today,” Berner said of the results, which she added “reflect solid execution against the three strategic priorities we've described previously.” First is enhancing operating performance by improving efficiency on the revenue side, “primarily through pricing and inventory management and improvements in sales execution, and by aggressively but thoughtfully reducing our costs profile.” Second is growing the company’s digital businesses; and third is optimizing its asset portfolio by buying or swapping “for assets that can help us obtain or expand market leadership positions, or divesting assets that are non-core or in markets where attaining a leadership position may be challenging.”

And addressing Cumulus’ growing interest in podcasting, she referred to being the exclusive partner for 40 podcasts that have generated nearly 52 million downloads in March 2019—which has more than doubled from 23 million in March 2018.

Berner also pointed to “exceptional growth” in digital across all of the company’s platforms, with total digital revenue for the quarter up 79% year over year. “Our streaming audience is growing steadily, driven by organic listenership and increased distribution on the TuneIn platform. And we're monetizing this high margin digital inventory better and more broadly, through all of our channels, local, national network, programmatic exchanges and networks.”

Looking at second quarter, the CEO said that sales are pacing “slightly negative, but essentially flat on an ex-political basis.”

Berner also said that station ratings for the most part, have rebounded. “We've gained back most of the share that was lost from 2012-2015 timeframe and now we're back up near to those levels. We experienced fluctuations quarter-to-quarter and also between PPM and diary markets as you would expect, but in general, we're continuing to see ratings share performance where it matters most.” In particular, she pointed to strong results with music stations in PPM markets, “which have a much higher percentage of their business that's rating-dependent.”