As the Chief Executive Officer of Cumulus Media sees it, the audio content creation and distribution company’s third quarter results are exactly where they are supposed to be, based on company projections and forecasts.
That said, there’s a “dichotomy” between local and national revenue that is playing a key role in the company’s profit and loss sheet, as Cumulus saw its net revenue drop and its net income shrink against tough comps.
For the quarter ending September 30, Cumulus’ net revenue declined to $207.42 million from $233.46 million, as net income declined to $2.72 million ($0.16 per diluted share) from $8.54 million ($0.45).
Of the three analysts who track Cumulus, the earnings per share easily came in ahead of even the highest estimate of $0.09, with the consensus expecting a -$0.19 EPS finish.
Meanwhile, the revenue was in-line with estimates, coming in just $50,000 below the consensus guess of $207.47 million,
Operating expenses were down, helping ease the declines, with content costs dipping to $76.74 million from $83.28 million and “selling, general and administrative expenses” declining to $91.83 million from $93.2 million.
This led to Operating Income of $17.58 million, down from $28.42 million.
Adjusted EBITDA for Q3 came in at $26.93 million, declining from $46.57 million.
Total debt (principal, gross) shrunk to $675.76 million, from $740.86 million.
NATIONAL VS. LOCAL: A BIG CHALLENGE
In prepared remarks that began the company’s Friday pre-market earnings call for analysts, investors and debtholders, Cumulus Media President/CEO Mary G. Berner said that Q3 revenue and adjusted EBITDA finished in line with expectations “with results reflecting the continued dichotomy between local and national business lines.”
She continued, “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.”
These actions, Berner said, further improved Cumulus’ revenue growth profile, operating leverage, financial flexibility, and strategic optionality. Collectively, she added, they position the company “to rebound when the advertising environment improves.”
When that improvement arrives, after 3 1/2 years since the COVID-19 pandemic ravaged the broadcast media industry, is perhaps a question some investors may be asking themselves. The television industry’s recovery came roughly 9 to 12 months later; radio broadcasting companies including Audacy Inc., Beasley Media Group and Salem Media Group have seen extreme headwinds for several quarters.
Financial and insurance category activity was the worst performing for Cumulus in Q3, CFO Frank López-Balboa noted on the earnings call.
Meanwhile, even with the earnings declines, Cumulus benefited from the sale of $10 million of what is today WUFL-FM (formerly WDRQ-FM) in Detroit to Family Life Radio.
“Considerable uncertainty” and “cautious optimism” cloud Cumulus’ fourth quarter 2023 results estimates, with 2024 expected to be more upbeat.
Berner detailed more of the company’s Q3 performance, noting that Local was down 5% and, as anticipated, local spot revenue was off 7% for the three months ending September 30.
On a positive note, Automotive was up 10%, despite recent strikes among United Auto Workers union members. Home products and the CPG category continue to show improvement year-over-year, too, as Berner commented that Procter & Gamble Co. has ramped up its spending — efforts championed by the company’s John Fix, who this week took to LinkedIn to announce his retirement.
Meanwhile, Retail advertising is recovering, as national efforts returned after several quarters of activity absence.
For 2024, while the water remains choppy and double-digit revenue declines from 2023 are forecast, Berner says Cumulus is seeing some initial indications from key national advertisers in several categories that “sentiment is improving for next year.”
However, weakness in national markets persists. “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,” Berner shared.
In pre-market activity on the Nasdaq market, CMLS was down 4.44% to $5.16. However, Cumulus stock, unlike its peers, has recovered significantly from a late spring 2023 slowdown that pushed shares down to $2.63 per share.
Furthermore, Cumulus’ enjoys a positive mid-term outlook from analysts, with beneficial financial health from mid-December through the end of the first half of 2024.
Jim Goss of Barrington Research was one of the analysts with questions for López-Balboa and Berner, in addition to Noble Capital Markets’ Mike Kupinski. Goss asked about digital and podcasting revenue, and López-Balboa confirmed that podcasting will very much remain one of “three buckets” for Cumulus, with growth ahead.
