Cumulus Media’s Earnings Call: Digital Growth Amid Broadcast Challenges

Cumulus Media ((CMLS)) has held its Q2 earnings call. Read on for the main highlights of the call.

Cumulus Media’s recent earnings call painted a mixed picture for investors. The company demonstrated robust growth in its digital marketing services and expanded its market share across various channels. However, it faced significant challenges with declining revenues in its broadcast and network businesses due to macroeconomic pressures and unfavorable market conditions. While cost reductions and strategic investments in digital growth areas are promising, the ongoing revenue pressures suggest a cautious outlook.

Digital Marketing Services Growth

Cumulus Media’s digital marketing services business experienced a remarkable 38% year-over-year growth, significantly outperforming its radio peers. This growth has resulted in an annual run rate of nearly $80 million, highlighting the company’s successful pivot towards digital solutions.

Digital Revenue Increase

The company’s total digital revenue for the quarter increased by 20%, driven by strong performances in digital marketing services and podcasting. Notably, when normalized for Daily Wire and Dan Bongino, the growth was over 30%, underscoring the strength of Cumulus’s digital offerings.

Market Share Growth

Cumulus Media has grown its revenue market share across all broadcast spot revenue channels, achieving 11 consecutive quarters of ratings share growth in PPM markets. This consistent performance reflects the company’s ability to maintain a competitive edge in a challenging market.

Cost Reductions

The company executed an additional $5 million in annualized fixed cost reductions, bringing the total to over $175 million in reductions over the last five years. These efforts demonstrate Cumulus’s commitment to strategic cost management and operational efficiency.

Cash and Flexibility

Cumulus Media concluded the quarter with $97 million in cash, including a $55 million draw on its ABL revolver. This financial position provides the company with significant flexibility to navigate the current economic landscape.

Total Revenue Decline

Despite the digital growth, Cumulus Media’s total revenue declined by 9.2%, impacted by ongoing macroeconomic pressures and weak national advertising. This decline affected both spot and network revenue, highlighting the challenges in the traditional broadcast sector.

Broadcast Revenue Decline

The decline in national advertising continues to impact Cumulus’s broadcast business, with total revenue pacing down in the low double digits into Q3. This trend underscores the difficulties faced by traditional media in the current advertising environment.

Network Revenue Challenges

Network revenue fell by approximately 20%, attributed to a lack of meaningful sports programming, weak national demand, and unfavorable comparisons related to Daily Wire and Dan Bongino. These factors have created significant headwinds for the network segment.

High Leverage Environment

Operating in a capital-constrained environment due to high leverage, Cumulus Media is focusing its investments on strategic opportunities with immediate returns on investment. This approach reflects the company’s cautious stance in a challenging financial landscape.

Forward-Looking Guidance

Looking ahead, Cumulus Media anticipates its Digital Marketing Services business to surpass a $100 million run rate by early next year. Despite the challenges in national advertising, particularly in the broadcast segment, the company remains optimistic about its digital growth. Cumulus is also leveraging AI for growth and efficiencies, contributing to its strategic cost management.

In conclusion, Cumulus Media’s earnings call revealed a company navigating a complex landscape with a mix of digital growth and traditional revenue challenges. While the digital marketing services and market share growth are promising, the ongoing revenue declines in broadcast and network segments necessitate a cautious outlook. Investors will be keen to see how Cumulus balances these dynamics in the coming quarters.