Cumulus Media - Earnings Call - Q2 2025

Executive Summary

• Q2 results modestly ahead of consensus on revenue and EPS: revenue $186.017M vs $184.150M consensus; Primary EPS −$0.60 vs −$0.72 consensus, while GAAP diluted EPS was −$0.74, reflecting ongoing macro and secular pressure but disciplined cost control and digital outperformance.
• Year-over-year, revenue declined 9.2% and Adjusted EBITDA decreased 11.3% to $22.358M; GAAP net loss improved to −$12.821M from −$27.699M on lower content costs and absence of prior-year debt exchange costs.
• Digital marketing services (DMS) remained the standout, growing 38% YoY and now ~50% of digital revenue; total digital grew 20% YoY excluding the Daily Wire and Dan Bongino impacts.
• Balance sheet liquidity increased with quarter-end cash of $96.745M (includes a $55M revolver draw); net debt (less unamortized discount) was $600.372M; management now expects 2025 CapEx to be below prior $22.5M guide.
• Near-term setup remains cautious: management said Q3 total revenue is pacing down “low double digits” (mid-single digits ex political and the Daily Wire/Bongino comps), with national spot still weak; DMS run-rate expected to surpass $100M early next year, a timeline acceleration versus Q1.

What Went Well and What Went Wrong

• What Went Well

  • Digital outperformance: “Digital marketing services grew 38%... Digital marketing services revenue now represents approximately 50% of total digital revenue”.
  • Share gains despite headwinds: “We continued to outperform our radio peers, gaining market share across all broadcast spot revenue channels”.
  • Execution and cost discipline: $5M of annualized fixed cost reductions in Q2; total $175M over 5 years; CapEx now expected below prior $22.5M guide.

• What Went Wrong

  • Broadcast weakness: Spot −10.5% YoY; Network −20.5% YoY on national softness, removed inventory, and unfavorable sports mix in Q2.
  • Overall top-line decline: Net revenue −9.2% YoY to $186.017M; Adjusted EBITDA −11.3% YoY to $22.358M.
  • Macro/national headwinds persist: Management is “not seeing any improvement in [national] pacing at this point,” and Q3 total revenue is pacing down low double digits.

Transcript

Speaker 2

Welcome to the Cumulus Media Collin Jones conference call. I'm the signer of Mr. Collin Jones, Executive Vice President of Strategy and Development, and President of Ms. Littleton. Sir, you may proceed with you.

Speaker 1

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 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. Our 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 accordance with GAAP. A full description of these risks, as well as financial reconciliations for 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. With that, I'll now turn it over to our President and CEO, Mary Berner.

Speaker 4

Thanks, Collin, and good morning, everyone. Due to the broadcast revenue backdrop, it remains frustratingly difficult. The macro pressure is by far the most significant driver of our total revenue decline of 9.2%, which is slightly better than the pacing guidance we provided in our last call. However, within that context, we continue to outperform our peers across several key metrics and can 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 revenue channels, presenting 11 straight quarters of ratings 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, even with 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 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. We finished the quarter with $97 million 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 a massive megaphone that reaches 92% of the country and 250 million listeners every month. Our ability to walk product to the door is delivered by our almost 500 locally embedded sales professionals. Our established relationships with approximately 30,000 local and national businesses are natural customers for new products we develop. Our multisensory content engine creates a lot of valuable content in an almost endless variety of formats. Our extensive, constantly growing library of premium audio content can be redeployed and monetized in multiple ways.

Turning to our second quarter performance, as we 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. The Digital Marketing Services business is up 38% year over year, an acceleration of the 30% growth we delivered last quarter in 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 and gives a thumbs up to the meaningful base of revenue, an annual run rate of nearly $80 million. Exceeding that level, concurrent with nearly 40% growth, reflects a success as a strategic plan we put in place several years ago.

It keys off our ability to seamlessly leverage the tens of thousands of client relationships maintained by our local sales force to sell curated sets 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 75%. 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 to 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 many of run rates still remaining.

We remain bullish about the prospects for this business. We now expect to surpass $100 million run rates early next year, increasing contribution margins as economies of scale start to kick in. Our other digital businesses, which include Streaming and Cumulus Podcast Network, also continue to perform well, though there is some noise in their results, in particular by comparison issues in Podcasting. Normalizing for the Daily Wire and Dan Bongino network comparisons, year over year, Podcasting was up over 30%. With that same normalization, 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 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.

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 spot, also provide clearly evident income opportunities for revenue generation from endorsements and sponsorships. We've mentioned on other calls the impressive performance of our multi-platform product Beyond Home Market, and this performance continued in Q2 with revenue of over 60%. This product leverages the scale of our platform and nationwide sales force to deliver multi-market, multi-product buys from 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, the consistent ratings share outperformance, particularly in the PPM markets, allowed us to continue to grow share in national spot. The 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 profitable for us. Those factors, combined with the relatively lower amount of more in-demand spot 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, total revenue pacing down low double digits, reflecting weakness in all broadcast revenue streams, as well as the Politico, 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 product-based revenue declines on EBITDA. 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 re-engineering 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 and emerging 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 close-sourcing the entire traffic commission, which will result in several million dollars of cost savings, which will be realized in 2026. 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 multi-functional exercise which has generated over 100 different project 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 teaming and sales platforms.

We are also seeing our entire sales force learn how to effectively use AI to craft cases, generate tech 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 to look at long-term opportunities we can unlock for additional value creation. In the short term, though, with our high leverage, we are obviously operating in a capital-constrained environment. As a result, we're limited to investing in those key opportunities where the ROI is almost immediate. 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 comprising either land or small stations currently under LOI or APA, which we hope to close by the end of this year. Uncontrolled 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 the Digital Marketing Services business, and embracing opportunities for long-term transformation, which AI will help 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 Media, 86% having confidence in leadership, and 83% excited for the future. In addition, the 2025 proxy results reflect engagement for shareholders and changes made in response to good feedback, which resulted in a 90% plus average 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 and drive new areas of growth. With that, I'll turn the call over to Frank.

Frank?

Speaker 0

Thank you, Mary. In the quarter, total revenue was down 9.2%, slightly better than the pacing commentary that we gave in our last earnings call. We're down 5%, excluding Politico, the impact of the Daily Wire, and Dan Bongino comparison. EBITDA for the quarter was $22.4 million. Digital revenue was up 20%, excluding the impact of the loss of Daily Wire and Dan Bongino, with our DMS business continuing its strong growth trajectory from 8% in Q2 and currently pacing up more than 35% in Q3. Further, DMS revenue now represents approximately 50% of our total digital revenue. From a broadcast category perspective, the travel and commute are our best-performing categories in spot, and pharma and insurance are some of our best in network.

Of note, as Mary mentioned, in the second quarter, the lack of meaningful sports programs has been a competitive strength for us, in addition to weak national demand. The previously mentioned comparison items impacted the network, which is down approximately 20%. Moving to expenses, total expenses in the quarter decreased by approximately $16 million year over year, reflecting lower variable costs and ongoing cost reduction efforts. They also imply higher expenses associated with the growth in our DMS businesses. In the second quarter, we executed $5 million of annualized cost reductions, leading to the savings of $70 million of cost reductions we've taken out since 2019, as mentioned in our last earnings call.

To end the balance sheet, we ended the quarter with $97 million of cash, debt maturity of $697 million, net debt of $600 million when excluding the $27 million of interest and debt reduction resulting from the 2024 exchange offer, which will be amortized over the term of the debt. These amounts include the $55 million 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 for the draw is only slightly higher than the rate we're earning on deposits. The quarter CapEx is $5.5 million, and we now expect full-year CapEx to be below the $22.5 million guidance that we mentioned on the previous call. Additionally, we expect to generate nearly $14 million of non-core assets for us by the end of the year.

Looking ahead, we're currently pacing down low double digits in total and down approximately mid-single digits as Politico, ex-Daily Wire, and net of the Bongino impact. As a reminder, in Q2 2024, we had total Politico revenue of $4.4 million. With that, we can now open the line for questions. Thank you, Peter.

Speaker 2

Thank you. At this moment, I'm speaking in today's Q&A session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove the question, please press star followed by 2. Tom, please make sure to comment on the amount of Cynthia Kaczynski, Noble Capital Markets. You may begin.

Speaker 3

Thank you. I have a couple of questions. In terms of the pacing, I was kind of hoping that, you know, given the increasing likelihood that there might be some sort of industry adoption as we go halfway into September or so, I was kind of hoping that we might start to see some improvement in national advertising, which kind of tends to be a lower early cycle and tends to kind of look forward. I was wondering, if you kind of look into the third quarter, do you see national pacing moving through the quarter? Specifically, as you come to September, I was just wondering how the pacing is going to look out for a month in the quarter.

Speaker 0

Michael, I'll take that question. It's a very good question. We've been continuously saying, as you mentioned, that a lower rate environment should certainly be good for all advertising channels. We've been waiting for a little bit of time for that to happen. The nature of national advertising, as you know, can be very lumpy and is very lumpy. We're not seeing any improvement in pacing at this point. I'm seeing some change pretty quickly. As you're sitting here right now, there hasn't been a significant difference.

Speaker 3

I'll take that for a concern. It's been working for you. That turn can be quite significant. In terms of just in, there has been a general decline in referral search engines traffic. I was just wondering if you can talk a little bit about your Digital Marketing Services. If you're seeing any issues related to that in any way, or if not, do you expect that it's going to have a problem? If you could just talk a little bit about maybe what your exposure might be to the cost of pursuing referral search engine traffic decline and what the impact might be.

Speaker 4

Yeah, I mean, I'll take that. Good morning, Mike. Search is a very, very small part of our digital business. As such, you know, as it becomes more pressured, as it changes, there will be some impact. Generally, we have, you know, our Digital Marketing Services business allows them to, you know, target. We do a lot of geotargeting, but there are other things, and we're not dependent on search. Our Boost product, which is presence products, is not affected at all.

Speaker 3

Do you think the number of eyeballs on price and so forth could possibly decrease the ROI that you deliver for your customers on your Digital Marketing Services business?

Speaker 4

Yeah, I mean, I think that certainly could. I think we're aware of it, and we are always fine-tuning when we go to market and what the products are and how they work together. Yeah, it could. You know, we have a very good track record of optimizing any kind of campaign, and we will continue to do that.

Speaker 3

Thank you. 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 categories on any particular mainstream that you're seeing that might kind of give you a little hope that maybe things could have stabilized a little bit and maybe show signs that might be, you know, some improvement going forward.

Speaker 0

Michael, I'll take that. Maybe just add on a couple of visual comments to give you some context. With the growth of DMS of close to 40%, you can tell that things are working extremely well. That's one thing in terms of the number of times we're getting in, the average pricing, the penetration with our existing clients, and then the benefits of new clients buying radio. For example, our password rate with existing clients is close to 20%. Close to 28% of clients who are buying digital only are now buying radio. We often multispeak with products. To your point, as Mary mentioned, search is one component of that. When we look at our runway and our pacing, we continue to be really bullish on that business. Moving to the categories, in our top five categories, broadcast spot, our professional services, home products, automotive, financial, and entertainment.

In total, that represents probably 55% to 60% of our business. In a general weak environment, even though we're seeing slight improvement in local spot versus national, it's still down, and that's reflected in our pacing. One of the things that impacts our business, particularly in our small market, is the continued decline in automotive. We're getting some benefit on digital. To your point, in terms of lower interest rates and dead lower interest rates, and that stimulates demand in categories like auto, we will verbally leverage that and should benefit from that.

Speaker 3

Thank you for the call. That's all I have. Thank you.

Speaker 2

Question is from the brand of Barrington Research for the unit of the provided company and company usage.

Speaker 3

Hi, Pat. We can hear you. Hi. I was wondering, from the digital side, if you could talk a little bit more on podcasting and you said some of the growth there, excluding the lost relationships. Would that go to bringing on additional podcasting, or is that mostly kind of organic to the existing footprint of shows?

Speaker 4

Yeah. Good morning. You know, we generally drive growth in three ways. First is we add new shows. The second is through strong execution to test certain audience growth, you know, across both audio and video. The third is just strong execution, including multi-platform ad packaging of the podcasting for us. We put it in broadcast. We're seeing growth. Many of the top shows continue to see impressions growth. We have The Sean Ryan Show, which continued with really good audience growth of, you know, tens of thousands of new followers in Q2. With Any Show, which is another one of our top podcasts in Q2, we get to the top three. We've got a couple of new ones, including some of our local, you know, for example.

Looking ahead, you know, we believe that we will continue that growth, you know, adjusted for the kind of the two items we've seen in the market, you know, several times.

Speaker 3

Okay. On the slide, we reflect you provided a different color on the cost reduction. I was wondering if you could kind of just talk about the pace of this decline that you had in Q2 and how would you think about that flowing through the remainder of the year?

Speaker 0

As you know, we continue to be very, very focused on our cost structure, regardless of the revenue environment. Another benefit that we had in the second quarter, in terms of cost, is that the action that we took last year benefited, regardless of the quarter. The total deduction of expenses in the second quarter are approximately $29 and almost $50. As I mentioned, we're adding on top of that. We always have, in fact, we always will look at to see whether or not we need the contracts or whether we can do better terms. We always look at our inventory and network to see the opportunity to that revenue opportunity versus the cost. As Mary mentioned on AI, we're going to be focused on continued business improvement, which will not only focus on the top line, we believe, but also on the product side.

In that, it's a long way of saying that we'll continue to be focused on that, and there are always opportunities. Again, having taken out $175 million of cost since 2019, the new number and the influence of cost that's going to be moved to that, it'd be more modest, but time will tell.

Speaker 2

Thank you. At this time, I'll pass the floor over to the management team for any further remarks.

Speaker 4

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

Speaker 2

Thank you all. This concludes today's call. We appreciate your participation. I hope you have a wonderful day, and at this time, you may go ahead and disconnect your line.