Cumulus Media Inc.

Good morning, ladies and gentlemen. Welcome to the Cumulus Media Quarterly Earnings Conference Call. I will now turn it over to Colin Jones, Executive Vice President of Strategy and Development. Sir, you may proceed.

Thank you, Operator. Welcome, everyone, to our second quarter 2023 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're 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. The 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 a link in our website. With that, I'll now turn it over to our President and CEO, Mary Berner. Mary?

Thanks, Colin, and good morning, everyone. In the second quarter, we generated revenue in line with expectations, while EBITDA exceeded expectations. While continued softness, primarily in the national advertising market, drove an overall revenue decline, we continue to deliver strong growth in our digital marketing services business, with digital revenue comprising 18% of total revenue. We also executed additional cost reductions, which benefited EBITDA and improved our balance sheet through free cash flow generation and additional debt buybacks. Simultaneously, we retired approximately 10% of our shares outstanding through a tender offer. More specifically during the quarter, we drove significant growth in our digital marketing services businesses, increasing revenue 21% year over year, while also investing further in the business to help fuel its future growth. We executed an additional $5 million of annualized non-revenue impacting fixed cost reduction, bringing the total to $15 million this year and $105 million since 2019. And we continue to support and benefit from our Best Among Peers liquidity position and balance sheet, generating $12 million of cash from operations, signing a highly accretive $10 million asset sale, retiring over 32 million face value of debt at a discount, bringing our net debt down to its lowest level in over a decade, and completing an equity tender offer for $5.7 million. These actions, once again, demonstrate our ability to maximize performance during difficult times by aggressively and relentlessly leveraging our platform to optimize areas that we can control and mitigate downside where we cannot. This proven skill set is serving us well as we make the best of the current tough ad environment and will drive what we believe will be a strong rebound in performance when the app environment improves. Along the way, we continue to have the financial flexibility, net leverage, and liquidity profile to remain optimistic and opportunistic in deploying capital for the benefit of our shareholders. On our last call, we described our business mix in some detail to help you to understand how the current softness in the national market in particular affects us. To reiterate, our national businesses, primarily consisting of the Westwood One Network, national spot, national podcasting, and national streaming, make up approximately 45% of our total revenue. And our local businesses, primarily consisting of local spot, local digital marketing services, local podcasting, and local streaming, make up approximately 50% of our total revenue. We continue to see macro-driven challenges across all our national ad channels with many national advertisers experiencing inflationary pressure and uncertainty in their own end markets that cause them to either reduce their spending or stay on the sidelines completely. While weakness among national advertisers has been broad-based, we did see some differentiation with categories such as retail and financial, particularly hard hit in the quarter, while others such as telecom and consumer packaged goods showed improvement year over year. This trend for the consumer packaged goods category is encouraging as we found success in leveraging Westwood One's unique position as the largest radio broadcast network to drive increased spending with top advertisers, and not just in Q2, but on a forward-looking basis as well. Similar to our national broadcasting business, in the second quarter in the national podcasting business also experienced revenue weakness, impacted by the decrease in spending for direct response to advertisers. That said, our podcast audience growth continues to be robust, up 19% in Q2. And in fact, not only are we a top five podcast network, but we represent what were six of the top 30 news talk shows on Apple in the quarter, dominating the category. With these audience trends, we are seeing a substantial increase in impressions that we will be able to monetize more fully when that national podcast revenue environment ultimately improves. Our local businesses continue to perform relatively better than national, led by our strong growth in our digital marketing services business, which, as I noted, was up 21% for the quarter. Local spot, which makes up approximately 80% of our total spot revenue, was down 7%. in Q2 consistent with our pacing guidance from last quarter's call. Five, local revenue came in 5% lower year over year. With local advertising, while we saw some downward pressure among most categories, auto remains an area of growth with the pace of that growth increasing each month during the quarter. April was up 2%, May was up 10%, and June was up 14%. Our local sales force is exceedingly well positioned to capitalize on automotive advertising, given our deep and longstanding relationships with auto decision makers, as well as their ancillary digital products, including our digital marketing services capabilities that we are now also bringing to bear in those discussions. Local digital marketing services was the brightest spot for us this quarter. As I've mentioned previously, this business is one that we continue to lean into heavily, as we believe it represents a tremendous market opportunity with strong incremental contribution margins. Specifically, we have leveraged our differentiated go-to-market strategy, which centers on a versatile and well-connected beat on the street sales team, offering a full suite of integrated audio and digital marketing solutions to drive significant growth in this $15 billion market, which is growing 5% to 10% a year. This sales approach not only leads to higher sales conversion, given the high-touch nature of the sales process, but it also allows us to bring in new clients and add and roll out new products as advertiser needs evolve. To that last point, we've been very successful with our suite of digital presence products. We call that Cumulus Boost, which was rolled out last year. We now have well over 500 active clients, and nearly half of those new Cumulus Boost clients are altogether new to Cumulus, meaning they didn't previously buy radio or digital from us. And of those, nearly half have expanded from their initial order to also buy additional teamless products. Thus far, our growth in digital marketing services has been generated on a completely organic basis with limited investment. However, as I mentioned, given our success so far and the size of the opportunity, we are making investments to further drive growth. Increasing the size of our digital marketing services sales organization with pure play digital sellers is one of our top priorities as we have found we can generate very quick returns from our refined and well-executed sales strategy. For example, initial testing has resulted in a tripling of monthly run rate digital revenue. So to that end, we have already hired or are in the process of hiring new sellers, which will triple our digital sales force by the end of third quarter. Additionally, because of our unrelenting focus on enhancing both the efficiency and margins of the digital services and products that we offer, we have built a team to take over certain responsibilities which were formerly outsourced to our white label partners. All in all, we are very optimistic about the growth trajectory that we expect for our digital marketing services business, particularly as we continue to ramp up our investments in this area. Meanwhile, we continue to aggressively reduce costs. During the third quarter, we executed an additional $5 million of annualized cost reductions, adding to the $100 million of reductions that we've already made since 2019. And finally, we remained laser-focused on maintaining our best among peers balance sheet and liquidity position through strong working capital management and disciplined capital allocation. In the second quarter, we bolstered our cash balance by generating $12 million of cash flow from operations, and announced the $10 million sale of WDRQ in Detroit, which we expect to close shortly. Between this sale and the sale of WFASFM earlier this year, we generated over 17 million of gross sale proceeds this year alone with the disposal of assets with negligible EBITDA. We also completed an equity tender offer for $5.7 million during the quarter. bringing us to a total of $39 million of shares repurchased out of our $50 million authorization, equivalent to approximately 22% of the total shares outstanding at year end 2021. In parallel, we were able to complete discounted debt buybacks, retiring 32.3 million face value of debt for 23.8 million of cash. Since announcing this capital allocation strategy in Q2 of last year, And combined with our last excess cash flow sweep of 12.5 million, we have retired 125 million in face value of debt. Before I turn the call over to Frank, who will give you more color on the quarter and our current Q3 pacing, I wanted to close by reiterating a couple of points. Pre-pandemic, our management team successfully executed an operational turnaround while right-sizing an inherited overextended balance sheet through restructuring. And since the pandemic, this team has driven best among peers performance on cost takeout, EBITDA margin recovery, free cash flow conversion, net leverage reduction, and cash generation. And in this particular cycle, we are intently focused on positioning the company to take advantage of the eventual recovery of high margin national advertising, investing in our digital marketing services business to develop a market-leading position in that space, reducing fixed costs to further enhance operating leverage, and generating substantial long-term value from shareholder value from opportunistic deployment of capital. And with that, I'll turn it over to you, Frank.