The final three months of 2024 won’t be brighter, revenue-wise, for one of the nation’s leading publicly traded radio broadcasting companies. And, the Q4 estimation comes following a third quarter earnings report that, notably, saw less political ad dollars than one key analyst thought Cumulus Media would achieve.
That said, revenue and EBITDA were “in-line” for the company in Q3, as President/CEO Mary Berner noted in prepared remarks delivered on a Friday pre-market earnings call for analysts and investors that the company “maintained our focus on what we can control.”
Again, “market challenges” permeated the conversation for Cumulus, the first of the publicly traded radio station licensees to report its Q3 2024 earnings results. “Specifically, we continued investing to drive growth in our digital businesses, including in digital marketing services,” Berner said. Such investment may be smart, as that arm of Cumulus saw its revenue grow by “nearly 40%” in Q3.
Berner also spoke of “capitalizing on areas of improvement in national and political ad
spending; maximizing operating cash flow; and improving operating leverage through ongoing expense reductions.”
The comments couldn’t cloud a down quarter for Cumulus, as revenue dipped by 1.8% to $203.6 million from $207.42 million in Q3 2023.
This led Cumulus to swing to a net loss in Q3 2024 of $10.32 million (-$0.61 per diluted share), from net income of $2.72 million ($0.16) in the third quarter of 2023. The results missed the forecast of one analyst (-$0.44 per share) and narrowly beat a -$0.64 EPS estimate from a second analyst offering their input to Yahoo! Finance. The Zacks Consensus Estimate was -$0.54.
Adjusted EBITDA declined by 10.7% to $24.05 million from $26.93 million.
Ahead of Friday’s Opening Bell on Friday, CMLS was up by 14 cents in pre-market trading to $1.31. As of 9:41am Eastern, that gain had disappeared, with shares down to $1.13. Then, Cumulus shares began a steep decline. As of 12:23pm Eastern, a staggering 24% dip in value was seen for CMLS, with shares at $0.89 on nearly triple the average daily volume of 40,062 shares.
At Friday’s closing bell, CMLS finished the session at $0.94, off 19.6% from Thursday. Volume was 225,935 shares.
SPOT SHOCK FROM ELECTION-FOCUSED ADS
What was the biggest blemish on the Q3 fiscal report card for Cumulus?
Spot revenue was off by 9% to $96.4 million, from $105.89 million, but this is largely due to political ad displacement.
So, how did Political ad dollars fare in Q3? They came in at $4.38 million, resulting in Political EBITDA of $3.94 million.
Digital revenue grew by 7.5% to $40.02 million, from $37.22 million, as Network dollars grew to $42.56 million from $40.36 million — just a few hundred dollars from where digital now stands one year later.
“Other” revenue increased to $24.62 million from $23.95 million, Cumulus said.
Add it all up, and total broadcast radio revenue slipped by 5%, to $138.96 million from $146.25 million.
A BUMPY ROAD AHEAD
On the earnings call, which lasted just shy of 30 minutes, Chief Financial Officer Frank López-Balboa shared that Q4 total company revenue is pacing down slightly.
In her prepared remarks, Berner shared how, looking forward, the advertising environment remains uncertain. Nonetheless, she spoke highly of Cumulus’ “valuable set of assets with which to navigate that uncertainty” — the digital business, its “vast national platform” (which includes a diminished presence in New York; Washington, D.C.; Detroit; and Los Angeles under Berner’s leadership), “extensive feet-on-the-street local sales capabilities which allow us to walk product through the door, and “premium programming with particular strength in Sports and News/Talk — also a trait of industry peer Audacy Inc., which just emerged from Chapter 11 bankruptcy protection.
Berner also saluted Cumulus’ leadership team “with a strong track record of expense management and disciplined stewardship of capital,” adding, ” As we continue to execute against our priorities, we see many paths for leveraging these assets to maximize the value they produce for our shareholders.”
Two analysts on the earnings call had questions for Berner and López-Balboa. Michael Kupinski of Noble Capital Markets asked about political ad revenue expectations versus performance in Q3. Political dollars came in “a little softer than what we were looking for,” and asked about year-to-date performance and if there’s any Q4 political dollars worth noting.
López-Balboa reminded Kupinski that comparisons to the 2020 U.S. presidential election were not the best when looking year-to-date for 2020, for two reasons. First, in the 2020 Democratic primary season, both Tom Steyer and Mike Bloomberg flooded Radio with millions of dollars in advertising. Then came the ad dollars in Georgia tied to competitive races and run-off elections. That represented between $5 million to $6 million in political ad dollars alone, López-Balboa said. He also suggested that the shift from President Biden to Vice President Harris as the Democratic nominee for U.S. President contributed to a smaller political dollar intake in Q3. This comment could be scrutinized by some, as the Harris-Walz campaign and an associated political action committee have been highly active in recent weeks, Media Monitors data show. That said, Cumulus’ footprint could be focused on states and cities outside of key battleground zones.
The Cumulus CFO then addressed a question from Kupinski about core advertiser trends. López-Balboa explained, “They want to see how the economy settles until after the election … or they don’t want to invest in what they see as clutter,” commenting on the abundance of political advertising, which some CMOs and brand managers may be avoiding due to challenging adjacencies.
Looking ahead, local spot pacing is looking stronger in Q4, with more robust growth in digital. But, national weakness and other factors are weighing.
Could improved interest rates bring better growth prospects for Cumulus? Barrington Research Research Analyst Patrick Sholl wanted to know, and López-Balboa replied that any reduction in mortgage rates could potentially make the financial product category healthier for Radio. But, he said there could potentially be a lag in the impact to ad spending.
