Cumulus Media’s second-quarter revenues declined amidst a “frustrating” industry environment and, although cost-cutting will continue to be part of its future, its leadership said it’s still committed to live and local broadcast.
President and CEO Mary Berner and EVP and Chief Financial Officer Frank Lopez-Balboa hosted a call Thursday to discuss its Q2 financials.
Cumulus’ leaders also pledged an acceleration into AI, and optimism for the company’s digital marketing.
Turbulent headwinds
Right from the start of the call, Berner described the current economic environment as “frustratingly difficult.”
Berner said she doesn’t expect the “secular headwinds” to ease in the short term; however, she said Cumulus continues to outperform its peers “in the areas we can control.”
In the quarter, the company’s total net revenue declined by 9.2% year-over-year to $186 million.
According to Berner, the decline was primarily driven by macroeconomic pressures. The results, she said, were slightly better than the guidance the company had provided in Q1.
She announced that the company executed $5 million in annualized cost reductions, bringing its total reductions to $175 million over the past five years. The reductions included a recent restructuring of its network and sales operations to streamline legacy processes, as well as a complete outsourcing of its traffic operations.
The company anticipates an additional $14 million in non-core asset sales, which includes land and smaller stations that are currently under a letter of intent, or an asset purchase agreement, and are expected to close by the end of the year.
Lopez-Balboa reported that overall network revenue was down 20%, attributing the drop to a lack of live sports content and a weak general market.
National advertising has been a weak point for the company. Lopez-Balboa suggested that lower interest rates would be a remedy, but cautioned that Cumulus “has been waiting quite a bit of time for that to happen.”
[Related: “At Risk of Delisting, Cumulus Faces a NASDAQ Deadline”]
Local advertising spots have seen a smaller decline but are still down, primarily due to a drop in the automotive category. Travel and finance were the company’s best-performing advertising categories. Lopez-Balboa reiterated that lower interest rates would help stimulate demand.
The company finished the quarter with $97 million in cash, which includes a $55 million draw on its revolving credit facility. Its total debt now stands at approximately $723 million.
Digital drives hope
Berner called Cumulus’ digital marketing services “a clear area of strength.”
While its digital revenue decreased by 1.4% from last year, she pointed out that it represents a 20% increase when excluding the $6.8 million reduction from discontinuing content partnerships with the Daily Wire and Dan Bongino.
Digital marketing services revenue, she added, was up 38% year-over-year and accounts for 50% of the company’s overall digital revenue.
Lopez-Balboa noted that 28% of Cumulus’ digital-only clients are now also buying radio advertising.
AI acceleration
Berner also highlighted the company’s growing use of AI to create growth opportunities and business efficiencies across “all functional aspects of the company.”
Examples of AI use include training the sales force to craft pitches, producing creative specs, and fine-tuning competitive analysis for packaging and pricing. Berner emphasized that AI is being integrated into the company’s daily operations.
“We are excited about long-term opportunities for value creation,” Berner said of the company’s AI initiatives.
[Related: “The AI Revolution in Radio & Streaming”]
Streaming and podcasts were another source of positivity for Berner, with Cumulus’ podcasting revenue growing by 30% from last year.
Berner also highlighted Cumulus’ market share growth across all broadcast advertising channels, saying the company has seen 11 consecutive quarters of ratings share growth in its PPM markets.
Q3 pacing downward
Looking ahead, Berner stated that the company expects total third-quarter revenue to be pacing down in the low double digits.
She cautioned that while local digital marketing would partially offset the revenue decline, “we are not yet at a point where contribution from our digital growth is offsetting the impact of broadcast revenue declines.”
Berner said Cumulus will continue to focus on cost reductions. But she also highlighted the company’s high corporate culture, citing its highest survey response rate in four years, and reaffirmed its commitment to a focus on a live and local radio presence.
“Trusted on-air relationships build enduring audiences and provide incremental opportunities for revenue, endorsements and sponsorships,” she said.
