Cumulus Media Inc.

Welcome to the Cumulus Media Quarterly Earnings Conference Call. I'll now turn it over to Colin Jones, Executive Vice President of Strategy and Development and President of Westward One. Sir, you may proceed with today's call.

Thank you, Operator. Welcome, everyone, to our second quarter 2025 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 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 Accords and 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 10-2 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 investor portion of our website. And with that, I'll now turn it over to our President and CEO, Mary Berger. Mary?

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. 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. Specifically, as measured by Miller Kaplan, we grew our revenue market share in all broadcast spot revenue channels, reflecting 11 straight quarters of rating share growth in our PPM markets 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. 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. 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, 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, 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 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. 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. Our digital marketing services business was up 38% year over year, an acceleration of the 30% growth it delivered last quarter and a massive outperformance, growing at a rate that was nearly double our radio peers, more than four times the rate at which the digital ad market is expected to grow, according to a recently published PwC report. 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. 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 own broadcasting and digital audio audiences. Further, our DMS solutions deliver ROI for our clients that outperform industry benchmarks by an average of around 25%. On 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. 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. 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 rates early next year with increasing contribution margins as economies of scale start to kick in. Our other digital businesses, which include streaming and the Keynotes Podcast Network, have also continued to perform well, though there is some noise in their results driven in particular by comparison issues in podcasting. 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, total digital revenue for the quarter was up 20%. Moving to our broadcast business, advertising headwinds, particularly among national advertisers, continue to impact both our spot and network revenue. However, as I highlighted earlier, in the markets in which we compete, as measured by Miller Kaplan, we gain market share once again in the quarter. 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, the strong relationships created by our trusted on-air personalities not only build enduring audiences, but in addition to stocks, also provide highly effective incremental opportunities for revenue generation from endorsements and sponsorships. I've mentioned on other calls the impressive performance of our multi-platform product, Beyond Home Market, and that performance continued in Q2 with revenue up over 60%. 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, the overall market environment continues to substantially pressure both our national spot and network revenue channels. That said, our consistent rating share outperformance, particularly in the PPM markets, allowed us to continue to grow share in national spot. Our network revenue line was affected this quarter by the comparison issues from the Daily Wire and Dan Bongino discontinuation, as well as inventory that we eliminated in 2024 that was unprofitable for us. Those factors, combined with the relatively lower amount of more in-demand sports inventory in Q2 as compared with other quarters, and the extremely weak general market environment all contributed to that revenue stream being down 20% in the quarter. As we look ahead to Q3, we are seeing a continuation of Q2 trends, with total revenue pacing down low double digits, reflecting weakness in all broadcast revenue streams, as well as the political, daily wire, and Dan Bongino comparisons. This is partially offset by strength in our local digital marketing services business. Given the fact that our higher margin broadcast business continues to be pressured, we are not yet at the point where the contribution from our digital growth is offsetting the impact of broadcast revenue declines on EBITDA. So we have and will continue to focus on fixed cost reductions. During the second quarter, we cut $5 million of annualized net fixed costs. Our emphasis continues to be on investing in digital growth areas while reengineering the business to drive more efficiencies and reduce fixed expenses. For example, in the quarter, we restructured our network sales and operations to streamline legacy processes and better align our go-to-market efforts with the assets that are the most attractive and where we have the most differentiated value proposition for our clients. Additionally, just last week, we announced that we are outsourcing our entire traffic function, which will result in several million dollars of cost savings, which will be realized in 2026. Also, we have considerably accelerated our efforts to identify and take advantage of the wide array of opportunities that AI provides us in such areas as sales enablement and training, impression growth, cost rationalization, and business process enhancements. We've been relentless in these efforts so far, conducting a multifunctional exercise, which has generated over 100 different projects ideas that are now being prioritized for execution. We've already seen great success creating efficiencies using customer service agents, repurposing content for our websites and social media platforms, and streamlining information access across our training and sales platforms. We're also training our entire sales force on how to effectively use AI to craft pitches, generate spec creative, develop valid business reasons for engagement, conduct competitive analysis, and fine-tune 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, seeding 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 four years and produced 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. 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% plus for the stay 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?