Cumulus Media Q2 2025 Earnings Call Transcript

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August 7, 2025

Key Takeaways

  • Negative Sentiment: In Q2, total revenue declined 9.2% year-over-year due to broad macro pressures and weak national advertising, slightly better than the prior pacing guidance.
  • Positive Sentiment: Digital Marketing Services revenue surged 38% in Q2, driving total digital growth of 20% and lifting the DMS run rate to nearly $80 million, with an expectation to exceed $100 million early next year.
  • Positive Sentiment: The company cut an additional $5 million of annualized fixed costs in Q2 and has now removed over $175 million in fixed expenses since 2019 while reallocating savings to strategic growth areas.
  • Positive Sentiment: Cumulus continues to outperform peers, achieving 11 consecutive quarters of rating share growth in PPM markets and gaining broadcast spot revenue market share in Q2.
  • Negative Sentiment: Looking into Q3, revenue is pacing down low double-digits, and digital gains have not yet offset continued declines in higher-margin broadcast segments on EBITDA.
AI Generated. May Contain Errors.
Earnings Conference Call
Cumulus Media Q2 2025
00:00 / 00:00

There are 6 speakers on the call.

Operator

Welcome to the Cumulus Media quarterly earnings conference call. I'll now turn it over to Collin Jones, Executive Vice President of Strategy and Development and President of Westwood. Sir, you may proceed with today's call.

Speaker 1

Thank you, operator. Welcome, everyone, to our second quarter twenty twenty five earnings conference call. I'm joined today by our President and CEO, Mary Berner

Speaker 2

and CFO, Frank Lotais Balboa. Before we start,

Speaker 1

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 the supplementary information is useful to investors, although it should not be considered superior to the measures presented in accordance with GAAP.

Speaker 1

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 the investor portion of our website. And with that, I'll now turn it over to our president and CEO, Mary Berger. Mary?

Speaker 3

Thanks, Colin, and good morning, everyone. In q two, the broadcast revenue backdrop remained frustratingly difficult. The macro pressure, by far, the most significant driver of our total revenue decline of 9.2%, which is 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 eleven 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.

Speaker 3

We also grew our digital revenue market share driven the standout performance of our local digital marketing services business, which is up 38% in the quarter. We continue to reduce costs, adding an additional 5,000,000 of annualized costs, bringing the total over a 175,000,000 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 97,000,000 of cash, inclusive of a 55,000,000 draw on our ABL revolver, which provides us with significant flexibility. As we look ahead, while we do not expect secular hidden 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 250,000,000 listeners every month.

Speaker 3

Our ability to walk product through the door is delivered by our almost 500 locally embedded sales professionals. We 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.

Speaker 3

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 we delivered last quarter and a massive outperformance, growing at a rate that was nearly double our radio peers and more than four times the rate at which digital ad market is expected to grow according to a recently published PWC report. This performance is even more notable if it comes off a meaningful base of revenue, an annual run rate of nearly 80,000,000. Achieving that level, incurred 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.

Speaker 3

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 achievements of record levels across important KPIs, including total customers and average campaign order size. Additionally, we 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 to surpass a 100,000,000 run rate early next year with increasing contribution margins as economies of scale start to kick in.

Speaker 3

Our other digital businesses, which includes streaming and Cumulus podcast network, also continued to perform well, though there's some noise in their results, in particular, by comparison issues in podcasting. Normalizing for the Daily Wire and Dan Bongino comparisons, year over year podcasting was up over 30%. For 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, continued 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 gained market share once again in the quarter.

Speaker 3

With respect to our local spot outperformance, we believe a key contributor to this is our strong focus in 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 Spot, also provide highly effective incremental opportunities for revenue generation from endorsements and sponsorships. I've listed on other calls the impressive performance of our multi platform products beyond home market, and that performance continued in q two 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 continued to substantially pressure both our national spot and network revenue channels.

Speaker 3

That said, 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 Bodio Pongino 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 spot sports inventory in q two as compared with other quarters and the extremely weak general market environment, all contributed to that revenue stream being down 20% in the quarter.

Operator

If we look ahead

Speaker 3

to q three, you're seeing a continuation of q two trends with total revenue pacing down low double digits, reflecting weakness in all broadcast revenue streams as well as the political, daily wire, and gambling genome 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 5,000,000 of annualized net fixed costs.

Speaker 3

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're outsourcing our entire traffic function, which will result in several million dollars of cost savings, which will be realized in 02/1926. 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 a 100 different projects idea that are now being prioritized for execution.

Speaker 3

We've already seen great success creating efficiencies using customer service agents, repurposing content for our websites and social media platforms, and streamlining streamlining information access across our training and sales platforms. We're also training our entire Salesforce on how to effectively use AI to craft speeches, 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 with long term opportunities we can unlock for additional value creation. In the short term, though, in 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.

Speaker 3

We ended the quarter with 97,000,000 of cash, which included a $55,000,000 draw on our ABL facility that occurred during the quarter. This draw will help us maximize optionality and flexibility. Additionally, we have nearly 14,000,000 of noncore 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 you accelerate.

Speaker 3

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, which 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. In addition 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 score vote for our board members and 85% plus for the say 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 to drive new areas of growth.

Speaker 3

With that, I'll turn the call over to Frank. Frank?

Speaker 4

Thank you, Mary. In the quarter, total revenue was down 9.2%, slightly better than the pace of commentary that we gave in our last earnings call and down 5% excluding political, the impact of the Daily Wire and Dan Longino comparison. EBITDA for the quarter was $22,400,000 Digital revenue was up 20% excluding the impact of loss of Daily Wire and Dan Longino with our DMS business continuing its strong growth trajectory, up 38% in Q2 and currently pacing up more than 35% in Q3. Further, DMS revenue now represents roughly 50% of our total digital revenue. From a

Operator

product

Speaker 4

category perspective, travel and financial were our best performing categories in spot, and pharma and insurance were some of our best in network. Of note, as Mary mentioned, in the second quarter, the lack of meaningful sports program has been a competitive strength for us in addition to weak national demand and the previously mentioned comparison items impacting net income, which was down approximately 20%. Moving to expenses, total expenses in the quarter decreased by approximately $16,000,000 year over year, reflecting lower variable costs and ongoing cost reduction efforts, partially offset by higher expenses associated with the growth in our GMS businesses. In the second quarter, we executed $5,000,000 of annualized cost reductions, adding to the $270,000,000 of fixed cost reductions we've taken out since 2019 and as mentioned on our last earnings call. Turning to balance sheet.

Speaker 4

We ended the quarter with $97,000,000 of cash, debt maturity of $697,000,000 Net debt of $600,000,000 when excluding the $27,000,000 of principal debt reduction resulting from the 2024 exchange offer, which will be amortized over the term of debt. These amounts include the $55,000,000 ABL draw that we made during the second quarter. The ABL draw should not have a material impact on cash flow as the borrowing rate from the draw is only slightly higher than the rate we're earning on deposits. Second quarter CapEx is $5,500,000 and we now expect full year CapEx to be below the $22,500,000 guidance that we mentioned on our previous call. Additionally, we expect to generate nearly $14,000,000 of noncore asset sales at the end of the year.

Speaker 4

Looking ahead, we're currently pacing down low double digits in total and down approximately mid single digits ex political, ex WIRE, net of the Bongino impact. As a reminder, in Q3 twenty twenty four, we had total political revenue of $6,400,000 With that, we can now open the line for questions. Operator?

Operator

Thank you. At this time, will now begin today's Q and A session. If you would like to ask a question, please press star followed by one and the telephone keypad. If for any reason you would like to remove your question,

Speaker 3

please press star

Operator

followed by 2. At this time, our first question will be coming from the line of Michael Chukinski with Noble Capital Markets. You may begin.

Speaker 2

Thank you. I have a couple more questions. In terms of the pacing, I was kinda hoping that, you know, given the increasing likelihood that there might be some sort of rate interest rate reduction

Speaker 4

and to go possibly into September. So I was

Speaker 2

kind of hoping that we might start to see some improvement in national advertising, which kind of tends to be a little early cycle and tends to kind of look forward. I was wondering if you kind of look into the third quarter, do you see nationals pacing improving through the quarter, specifically as you kind of look to September? Was just wondering how the pacings kind of look per month in the quarter.

Speaker 4

Mike, I'll take that question, a very good question. We've been continuously saying, as you mentioned, that a lower rate environment should generally be good for all advertising channels. We've been waiting for quite a bit of time for that to happen. And then the nature of national advertising, as you know, can be very lumpy and is very lumpy. And so in fact, we're not seeing any improvement in pacing at this point, but things can change pretty quickly.

Speaker 4

But as we're sitting here right now, there hasn't been a significant difference.

Speaker 2

Gotcha. And I would say national pressure is different portion for you that that turn could be quite significant. So in terms of just in there there has been a general decline in referral search engine traffic, and I was just wondering if you can talk a little bit about your digital marketing or service and if you're seeing any issues related to that in any way. Or if if not, do you expect that it could have a problem? And if you could just talk a little bit about maybe what your exposure might be to the process of seeing referral search engine traffic decline and what the impact might be on your businesses.

Speaker 3

Yeah. I mean, I'll take that. Good morning, Mike. Referral search is is a very, very small part of our digital business. And so as such, you know, as as it becomes more pressured, as it changes, there will be some impact.

Speaker 3

Generally, we have you know, our our digital marketing services business is allows them to, you know, target. We do a lot of geo targeting. Other other things that we're not dependent on search. So and then our Boost product, which is a Presence product, is not affected at all.

Speaker 2

Could it decrease the number of eyeballs on-site and so forth and possibly decrease the ROI that you deliver for your customers on some of your DMS?

Speaker 3

Yeah. I mean, I think that certainly could. But I think we're, you know, we're aware of it, and we are always fine tuning how we go to market and what the products are and how they work together. So, yeah, I could. But I think we've, you know, we've we have a a very good track record of, you know, optimizing any kind of campaign, and so we'll continue to do that.

Speaker 2

Thank you. And just one final question. In terms of just advertising categories, I was just wondering if you can talk a little bit about some of the key key categories. Are there any particular brain shoots that you're seeing that might kind of give you a little hope that maybe things kind of stabilize a little bit, maybe show signs that might be, you know, some improvement going forward?

Speaker 4

Mike, I'll take that. But let me just add on a couple of visual comments to get some context. So with the growth of DNS close to 40%, you can tell that things are working extremely well. And that's working in terms of the number of clients we're getting in the average pricing, the penetration with their existing clients, and then the benefits of new clients paying radio. So for example, our attachment rate with existing clients close to 20%.

Speaker 4

It's 28% of clients who are buying digital only are now buying radio. We offer a multi speed products. So to your and as Mary mentioned, search is one component of that. And when we look at our runway and our pacing, we continue to be really bullish on that business. Moving to the categories.

Speaker 4

In our top five categories, broadcast, spot, our professional services, home products, automotive, financial,

Speaker 2

and entertainment. In total, that represents

Speaker 4

probably 55% to 60% of our business. In a general weak environment, I mean, though we're seeing slight improvement in local spot versus national, it's still down, and that's reflecting our pacing. One of the things that's impacted our business, particularly in our small markets, is we continue to decline in automotive, which we are getting some benefit on digital. But to your point in terms of lower interest rates, if they get lower interest rates, that stimulates demand in categories like auto. We're we're really well levered to that, and we should benefit from that.

Speaker 4

Thank you for the color. That's all

Speaker 2

I have.

Speaker 4

Thank you. The

Operator

next question is from the line of Patrick Shaw with Univerbod, company everyone you choose. You may begin.

Speaker 5

Hello?

Speaker 2

Hi. Sorry. We can hear you. Sorry.

Speaker 5

Hi. I was wondering on the digital side, if you could maybe talk a little bit more on podcasting. And I think you said about the growth there excluding the the lost relationships. Is that due to bringing on additional podcast, or was that mostly kind of just organic to the existing footprint of of shows?

Speaker 3

Yeah. Good morning. You know, we generally drive growth in three ways. The first is we we add new shows. The second is, through strong execution to capture audience growth, you know, across both audio and video.

Speaker 3

And then third is just strong execution, including multi platform ad packaging of the the podcast inventory. So we put it in broadcast live. So we're seeing growth. Many of our top shows continue to see impressions growth. We have the Sean Ryan show, which continued with really impressive audience growth of, you know, tens of thousands of new followers in q two.

Speaker 3

Denny Denny Show, which is another one of

Speaker 5

our top

Speaker 3

top podcast in q two, made it to the top 30. And then we've got a bunch of new ones, including some of our some of our local, you know, for example. Looking ahead, you know, we we believe that we will continue that growth, you know, adjusted for

Speaker 4

the kind

Speaker 3

of the the two items we've talked about, you know, several times. Okay. And then just on the expense

Speaker 5

side, you provided additional color on the fixed cost reductions. I was wondering if you could just talking about the pace of, OpEx declines that you had in q two, is that sort of is like the it would be a how how would you think about that going through the for the remainder of the year?

Speaker 2

Well, as you know, we continue to

Speaker 4

be very, very focused on our cost structure regardless of the revenue environment. Part of the benefit that we had in the second quarter in terms of costs is that the actions that we took last year kind of headed the second quarter. So the total production expenses in the second quarter, approximately $10,000,000 of that was fixed costs. And then as I mentioned, we're adding on top of that. We always have contract renewals we'll look at to see whether or not we need those contracts or whether or not we can have better terms.

Speaker 4

We always look at our our inventory of network and see the opportunity for that revenue opportunities versus the cost. And as Mary mentioned, on AI, we're we're gonna be focused on continued business optimization, which will not only help us in the top line, I believe, but also on the cost side. So in that is a long way of saying that we'll continue to be focused on that, and and there are always opportunities. But, again, having taken out a 175,000,000 fixed cost since 2019 is

Speaker 2

a big number and the

Speaker 4

improvements of cost savings after that will be more should be more modest, but time to tell.

Operator

Thank you. Thank you, Tom. I'll pass the call first back over to the management team for any further remarks.

Speaker 3

We appreciate everyone being in the call, and we look forward to meeting with you at the next call. Thank you.

Operator

Thank you all. This has been good to have your conference call. We appreciate your participation. We hope you have a wonderful day. And at this time, you may now disconnect your line.

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