Cumulus Media Inc.

Good morning. 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 third quarter 2023 earnings conference call. I'm joined today by our President and CEO, Mary Berner, and our CFO, Frank Lopez-Malboa. 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 violence 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. Press release can be found in the investor relations portion of our website, and our form 10Q 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 investor portion of 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 third quarter, revenue and EBITDA met expectations, with results reflecting the ongoing dichotomy between local and national performances. While the softness in national advertising persisted, causing an overall revenue decline, we mitigated that impact through our ongoing focus on areas that we can control, investing in our digital businesses, reducing costs, and improving our balance sheet through non-core asset sales and debt reduction. More specifically, during the quarter, we increased digital revenue by 7%, streaming, podcasting, and digital marketing services each growing during the period. We executed an additional $5 million of annualized non-revenue impacting fixed cost reductions, bringing the total to $110 million since 2019. And we continued to maintain our best among peers liquidity position and balance sheet, completing a highly accretive $10 million non-core asset sale and retiring over $5 million base value of debt at a discount. These actions further improve the company's revenue growth profile, operating leverage, financial flexibility, and strategic optionality, and collectively position us to rebound strongly when the advertising environment improves. That said, national advertising continued to be weak in Q3. with clients citing ongoing uncertainty in the macro environment as the main reason for lower spending. Our national businesses account for approximately 45% of our total revenue, and we saw top-line impact in both network and national broadcasts, particularly in the professional services, financial, and insurance categories. However, there were and are some green shoots worth noting. In particular, home products and consumer packaged goods continue to show improvement year over year, Of note, P&G ramped up spending since the start of their new fiscal year on July 1st, citing their commitment to high ROI ad spend, and they increased their bookings for us in Q3 and continuing into Q4. In that same vein, in our early upfront conversations, national advertisers who continue to appreciate the value of radio's scale, reach, and ROI have are indicating a desire to return to more normal levels of spending as they set their 2024 budgets. Another key category worth mentioning is retail. Though heading into the fourth quarter holiday season, the category is currently pacing down in aggregate. Several big box retailers have notably started spending again after being out of network radio for several quarters. Ditto with national podcast advertising, which was down in the first half of this year and returned to growth, up 8% in Q3, supported by continued strong audience growth trends. September downloads, for example, were up 17%. While considerable uncertainty remains in Q4, these positive trends and improving sentiment and tone give us cautious optimism that we will see a better national advertising environment in 2024. Continuing the theme of the last few quarters, compared to national, our local businesses have been more insulated from macro ad pressures. Total local revenue, which includes local spot and our local digital revenue streams, was down 5% for Q3. Local spot broadcast revenue was down about 7% in Q3, in line with our commentary from the last call. As with Q2, while spending in most advertising categories declined, auto continued to show growth, up 10%, despite the recent strikes. Thus far, the strikes have mostly negatively impacted markets in which factories have been shut down, where both dealers in affected markets have pulled back spending to avoid alienating local listeners and striking auto workers, and where other local SMBs in the same markets have also pulled back spending as the strikes have impacted the broader local economy. While we are paying close attention to any knock-on effects from the strikes, we still believe this category represents a high-margin recovery opportunity long-term, given that Q3 spending is is still only at 60% of 2019 levels. Turning to our local digital marketing services business, as we highlighted on our last call, we expect this to be a significant growth opportunity for us as we make further inroads into the 15-plus billion TAM this business serves. Digital marketing services grew mid-single digits in the quarter, driven by subscriber growth and Cumulus Boost, the suite of digital presence products that we launched in the middle of last year. We are continuing to build the business by leveraging our unique sales process and growing sales organization. To that point, since our last earnings call, we've tripled our digital sales force and we expect to add additional resources in this area to drive further growth for 2024 payout and beyond. Overall, we remain very optimistic about the growth trajectory of our digital marketing services business, particularly as we continue to ramp up investment in this business. Meanwhile, as we've been doing in recent quarters to mitigate the revenue pressures from the depressed national ad market and to free up resources for digital investments, we continue to meaningfully reduce costs. During the third quarter, we executed an additional $5 million of annualized fixed cost reductions, bringing the total to $20 million this year and $110 million since 2019. These actions, again, reflect our aggressive but thoughtful approach to reducing costs to improve the company's operating leverage without impacting revenue growth. And finally, we remain focused on maintaining our best among peers balance sheet and liquidity positions through disciplined capital allocation. In the third quarter, we completed the highly accretive $10 million sale of WDRQ-FM in Detroit, a station with de minimis EBITDA. We also completed a discounted prepayment of our term loans, retiring $5.2 million base value of debt at 83.5% of PAR. Since the beginning of last year, we retired over $130 million in base value of debt, bringing total debt down to $676 million, the lowest it's been in over a decade, and net debt to $593 million. Additionally, at this point in time, we believe reducing debt is the best way to maximize financial flexibility and strategic optionality headed to what we hope will be a recovery year. Looking ahead into Q4, as I mentioned, the market remains choppy, with revenue pacing down low double digits, impacted by both the continuing weakness in national advertising and a tough political comparison. While we are cautiously optimistic that the environment will improve in 2024, Under any circumstance, we are prepared for what comes. Since the pandemic, our management team has driven best among peers performance on cost takeouts, EBITDA margin recovery, free cash flow conversion, and net leverage reduction, and we are committed to maintaining that track record regardless of the environment. With that, Frank, I'll turn it over to you.