Cumulus Media Inc.

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 and President of Westwood One. Sir, you may proceed.

Thank you, Operator. Welcome, everyone, to our fourth quarter and full year 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 this 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-K 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 the investors portion of our website. With that, I'll now turn it over to our president and CEO, Mary Berger. Mary?

Thanks, Colin, and good morning, everyone. As you know, the radio industry has faced significant challenges over the last few years. The pandemic, unfavorable secular trends, and a significant downdraft in national advertising, which began in early 2022, and as we noted on other calls, affected us disproportionately given our business mix. Nonetheless, in the face of those headwinds, Cumulus outperformed, continuing to best its peers through the end of 2023 on key metrics such as cost takeouts, EBITDA margin recovery, free cash flow conversion, net leverage, and liquidity. However, last year brought additional challenges in the form of accelerated national headwinds, as well as an industry-wide slowdown in local broadcast advertising, which became more pronounced toward the end of the year. But as we have demonstrated time and again, while we can't control external factors, we can control how we respond to mitigate the impacts of the macro environment and how we get more out of the assets that we have. As I'll talk more about in a moment, last year we doubled down on and are seeing the fruits of investing in digital. We evolved the way we sell our broadcast business. We further re-engineered our cost structure, and we extended our balance sheet maturities through a comprehensive exchange refinancing. In parallel, as part of a comprehensive effort to create additional long-term value, we are fundamentally transforming the way we use and leverage our key assets, which include a massive megaphone that reaches 92% of the country and more than 250 million listeners every month. Almost 500 locally embedded sales professionals who leverage their market insights and ability to walk product into the door to drive sales. Established relationships with 30,000 local and national businesses who are natural customers for new products we develop. An audio-first content machine that creates and distributes content in a wide variety of formats across multiple platforms. And an extensive, constantly growing library of premium audio content that can be redeployed and monetized in multiple ways. Reimagining how we leverage these assets means developing new products organically and through partnerships, which we can monetize through our sales force and relationships. It means creating new content and redistributing existing content through new channels and to incremental audiences. And it means taking advantage of the power of our local and national brands, to name just a few. This is happening alongside our day-to-day blocking and tackling and our relentless focus on business optimization. Collectively, these efforts will help us to generate more revenue, create additional value, and take further advantage of the financial flexibility and optionality that we secured last year by extending our debt maturities to 2029. Turning back to 2024 performance, I'll start with our digital businesses, which now account for approximately 19% of our total company revenue in aggregate. Our digital marketing services business continues to be an area of outsized growth. On a revenue increase of 27% year over year, it went from being the smallest of our digital businesses in 2023 to the largest in 2024. As a reminder, We built the digital marketing services business from scratch and grew it profitably and organically from day one through strategic investments and by pivoting our radio-only sales force to one that now provides our clients with an expanded set of marketing tools and services in addition to broadcast radio. To put a finer point on this, our expanded capabilities are allowing us to upsell our existing customers as demonstrated by the 30% year-over-year increase in legacy radio-only customers who now also buy DMS. This has also driven new customer growth, allowing us to add digital-only customers up 31% year-over-year. And in fact, today, over half of our DMS customers are digital-only accounts. Also worth noting, we began 2025 with significant momentum in the DMS business, having achieved all-time highs in several key performance indicators during the fourth quarter, including Customer count up 18%, average digital order size per customer up 11%, and we've improved our already high retention rate. These achievements are further evidence of our competitiveness in the DMS market, and they reflect three key components, which in combination are difficult to replicate. First, our on-the-ground sales teams whose local insights and relationships underpin our go-to-market efforts. Second, our fully integrated and customizable solutions. And third, our ability to deliver outcomes for our clients that outperform industry benchmarks by an average of 25%. Also, as I mentioned, we continue to make additional investments to accelerate the growth of DMS. For example, since the third quarter, we've nearly doubled the size of our centralized digital agency team, the group responsible for driving improvements in campaign performance, customer satisfaction, and campaign efficacy leading, as I just said, to better customer retention and same-store sales. We also continue to add new products to our DMS portfolio, as well as more digital sales associates. With significant runway still ahead of us in the DMS market, we see a lot of upside from our continuing ability to leverage our unique competitive positioning. Moving to podcasting, where we were a top 10 podcast at the end of the year, We continued to add new products in 2024, notably The Benny Show, hosted by Benny Johnson, which secured the number five spot among news talk podcasts following the elections, and Evita Duffy, whose podcast debuted at number 11. From a revenue standpoint, podcast revenue was down slightly in 2024, reflecting Daily Wire's decision to start taking its ad sales function in-house. This transition was fully completed by the end of 2024. Excluding Daily Wire, podcast revenue was up over 35% in 2024. In Q1, we expect that growth from existing podcasts and new content additions will come close to fully offsetting the loss of Daily Wire, which represents a $4 million negative revenue comp in that quarter and an approximately $15 million negative revenue comp for the full year. While we had expected that by the end of 2025, as I just said, increased revenue from our podcast assets would largely offset the impact of the daily wire exit. You may have seen earlier this week that Dan Bongino accepted an appointment to become the deputy director of the FBI. We congratulate Dan on his new position, but his appointment will of course mean that while he is serving in the administration, he will be unable to perform his radio show or podcast. That said, We look forward to welcoming him back in the future. In the meantime, we are working on programming to fill the void, although we do anticipate that this will be an additional headwind in 2025 comparable to the loss of the daily wire comp for the year. Streaming, our third digital business, was down 4% during the year. As mentioned on prior calls, we had a difficult comp in 2024 caused by the expiration of a fixed-rate sales contract. However, as we've repeatedly stated, we believed that taking back our inventory was the right long-term move because we knew that it would allow us to better manage and optimize the monetization of our streaming impressions, which grew 15% in 2024. And proof of that is the fact that the streaming revenue is currently pacing up in Q1. With regard to our broadcast business, while we've benefited from approximately 19 million of political advertising during the year, as I said, the already difficult headwinds accelerated as the demand pressure impacting national advertising expanded to local advertisers, particularly as we approached the end of the year. Nonetheless, there were bright spots. For example, advertiser interest in live sports remained robust, allowing us to capitalize on our exclusive audio relationship with the NFL to book all-time highs in revenue for the Super Bowl in 2024. Drafting off that success, we bested that mark to achieve another new all-time high in this year's Super Bowl. Another bright spot was the success of our hyper-focused efforts in local advertising in areas where we were seeing demand resilience. For example, as first discussed during our Q2 2024 earnings call, our multi-market, multi-platform business known as Beyond Home Market, or BHM, grew up nicely in 2024, up 35% year-over-year. And we continue to see that growth trend accelerate in these early days of 2025. It's also worth noting that our BHM teams have not only been successful in bringing in large new clients to radio, but have also built some of our digital only clients into million dollar plus relationships, a testament to our acumen and the sophistication of our capabilities. As we look ahead from a revenue perspective, the underlying trends that we saw at the end of 2024 are continuing in Q1, with broadcast demand weakness reflecting ongoing concerns about inflation, higher than previously expected interest rates, the potential impact of tariffs, and deteriorating consumer sentiment, while DMS growth continues to be robust. On a total company basis, we are currently pacing down mid-single digits for the quarter. Normalizing for political and the loss of daily wire, Q1 revenue is pacing down low single digits. These trends underscore how critical our efforts to reduce costs have been and will continue to be. And as such, in the fourth quarter, we continue to reduce costs across the organization. Through a combination of reductions in force, contract management, and renegotiations, and continuing to adapt the way we operate the business, we generated approximately $35 million of annualized net cost reductions in Q4 2020. which are on top of the nearly 128 million of cost reductions that we already had made from 2019 through Q3. Or said another way, from 2019 through 2024, we reduced our fixed cost base by 22%, and through 2025, that number will be over 27%. Moving to the balance sheet, despite the challenging operating environment, we were able to maintain our liquidity position at year-end versus the prior quarter, benefiting from cash generated from operations. Further, during the year, as I mentioned, we completed the refinancing of our debt, which extended maturities to 2029, buying us additional financial flexibility and optionality. Looking ahead, our focus remains on reengineering the business to drive operating efficiency while still investing in our digital businesses to drive growth. Additionally, managing our balance sheet will continue to be critical to fully realizing the potential that we believe our assets can yield. To that point, our capital allocation focus will remain on reducing net debt, which we have a proven track record of doing, with net debt reductions of more than 40% since 2019, utilizing cash generated from operations and the monetization of non-core and non-EBITDA-producing assets. So before turning it over to Frank, I'd like to note that we've been very active engaging with shareholders this year. We really appreciate all the feedback that we received. Also, I want to highlight the addition of Steve Galbraith, who is a major shareholder to our board. Also worth noting, the board made a determination to not renew the shareholder rights plan, which was put in place in Q1 of last year. And finally, I want to express how proud and appreciative I am of the entire Cumulus team for continuing to deliver in the face of such a challenging market environment. Looking ahead, we will remain laser-focused on mitigating the impacts of broadcast radio trends through cost reductions and investment in our digital business. Additionally, as we reimagine our business for the long term, we will continue to unlock additional opportunities that leverage our many key assets. And given the refinancing we completed in 2024, we have more time to execute these strategies. In this rapidly evolving media and regulatory landscape, we believe that with our strong operating track record and this great collection of assets, there will be more and more options for us to generate growth, both organically and through partnerships, and build long-term value for shareholders. With that, I'll turn the call over to Frank. Frank?