Berner Sees “Inflection Point” for Cumulus

Still, revenue was down in Q1; company also plans more cap-ex spending
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Cumulus’ plan to move “from decline to stabilization to growth” is unfolding to the point where CEO Mary Berner says the company has arrived at a “financial inflection point” in its turnaround. Still, its revenue in the first quarter was lower than in the same period a year ago.

One company official also hinted at higher cap-ex spending this year — “to address the significant historical under-investment in infrastructure at the company.”

Berner spoke about the broadcaster’s latest earnings report Monday. She plugged away at rumors of a potential bankruptcy filing, saying her strategy — paying attention to “blocking and tackling,” growing ratings, fixing the company culture, executing sales — is working and that the downward trajectory of recent years at Cumulus has been reversed.

“Encouragingly, this Q1 performance reflects significant progress in both revenue and expense drivers throughout the company, particularly at Westwood One,” Berner said.

Total revenue in the quarter ending March 31 was $264 million, down 1.7% from the period in 2016, mostly attributable to a loss of political revenue. If you look only at the company’s station group, minus WW1, revenues were $173.6 million compared to $176.5 million in Q1 2016.

Ratings growth continues to help. And Berner says she is encouraged about Q2 pacing at Cumulus, which is flat, but “ok, considering the soft market environment” for national advertising.

“Thanks to the success of our ratings and sales execution strategies we have now gained share in total revenue at the station group in three straight quarters,” Berner said on the call with financial analysts.

Berner described the three-month period at WW1, led by President Suzanne Grimes, as its “best quarter in years,” despite an overall drop in revenue at the network syndicator of about 1.9% for the quarter from a year ago.

Company executives did not ignore the company’s extraordinary debt, which stood at $2.4 billion at the beginning of the year. Berner said the company is over-levered and the “high debt levels must be addressed to achieve the full potential of assets” at Cumulus. “To that end we are intent on exploring all available options to address that debt burden in a way not to derail our turnaround efforts,” she said.

Cumulus CFO John Abbot reported capital expenditures in Q1 of $5.7 million compared to $4.2 million in 2016. “We do expect cap-ex to run higher in 2017 to approximately $30 million for the full year, due to the need to address the significant historical under-investment in infrastructure at the company,” Abbot said.

Abbot said the company is in discussion with NASDAQ about the potential delisting of Cumulus stock. It turns out the company is non-compliant with NASDAQ rules on several fronts, including the value of stockholder equity on the balance sheet, for which it has asked an extension, and the company’s minimum stock price. NASDAQ sent Cumulus a deficiency notice in March for violating it $1.00 minimum bid price for 30 consecutive days. Cumulus now has until early October to fix the sub-$1.00 share price. Cumulus stock closed Monday at $0.31 cents per share.

Cumulus, which owns approximately 445 radio stations and operates in 90 U.S. media markets, is still hoping to complete the sale of some prime land in Bethesda, Md., this year, “with gross sales proceeds of $75 million as a reasonable expectation,” Abbot said. It’s the former tower site of WMAL(AM).

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