Cumulus Media on Friday said it remains focused on operational cost cutting in the face of slow national advertising sales.
The company has cut $20 million in operating expenses so far this year, according to company executives. However, the radio station owner is still trying to grow its digital business.
Cumulus posted quarterly net revenue of $207.4 million for the period ending Sept. 30, 2023. That’s down 11% compared to the same quarter in 2022.
Spot sales in the broadcast division of Cumulus, especially national, are struggling, according to the earnings report released Friday. Broadcast radio revenue of $105.8 million in the third quarter was off 15% compared to the same three months in 2022.
Cumulus reported total broadcast radio revenue of $146 million, which includes the company’s Westwood One radio network business. Network revenue in the quarter was off 22.8% YOY with revenue of $40.3 million.
Digital appears to be the lone bright spot in the company’s third quarter report with revenue volume up 6.6% YoY. Cumulus posted digital revenue of $37.2 million in the third quarter, or about 18% of total revenue, according to the company’s filing with the U.S. Securities and Exchange Commission.
In a statement released as part of its third quarter report, Cumulus CEO Mary Berner said: “Despite the challenging environment, we maximized performance by continuing to focus on areas we can control, including growing each of our digital businesses, reducing costs, and improving our balance sheet through non-core asset sales and debt reduction.”
Cumulus has “tripled its digital sales force in the past three months and expects to add additional resources in the area to drive further growth,” Berner said on the Friday earnings call with investors.
“As we have been doing in recent quarters to mitigate the revenue pressures from the depressed national ad market, and to free up resources for digital investments, we continue to meaningfully reduce costs. During the third quarter we executed an additional $5 million of annualized fixed costs,” Berner said.
The cut in total expenses in the third quarter were driven by fixed cost reductions as well as lower variable costs, according to the financial report. Thanks to the cuts Cumulus reported net income of $2.7 million in Q3.
On Friday’s earnings call, analyst Michael Kupinski from Noble Capital Markets asked Cumulus Chief Financial Officer Frank Lopez-Balboa to identify in what areas the company is taking money out.
“The areas where we are reducing costs are not impacting revenue. And we are actually increasing our sales force focus, which has been a key focus of ours. The areas that we continue to get efficiencies are in areas like real estate. We are operating in a different way and we continually are looking at our footprint across the country.
“We are also being very judicious in terms of our use of external contractors and external contracts and where possible we have been very successful renegotiating contracts at better rates,” Lopez-Balboa told investors.
The company reported total debt of $675 million at the end of September 2023. Cumulus reports it has reduced its debt by $130 million since the beginning of last year. “Reducing debt is the best way to maximize financial flexibility and strategic optionality heading into what we hope to be a recovery year,” Berner told investors.
Cumulus has sold off some assets to help the balance sheet. The company reported it completed the sale of WDRQ(FM) in Detroit for $10 million in the third quarter of 2023.
Looking ahead to Q4, Berner says the market “remains choppy with company revenue pacing down low double digits.”
Despite the continued weakness in national markets, Berner says the broadcaster is seeing initial indications from key national advertisers that the outlook is improving for 2024.
“That tone, combined with the anticipation of a robust political spending cycle, gives us cautious optimism that we may be seeing the early signs of a market recovery,” she said.
