Struggling stations pull Cumulus into the pro forma red


CumulusQ3 marks the point at which Cumulus closed on its merger with Citadel, and as such, raw numbers are up — way up. However, on a pro forma basis, it’s a different story. Cumulus Chairman/CEO Lew Dickey says the company’s results would have been flat Q3 were it not for a troublesome set of turnaround stations.

Actual net revenue rose from $124.8M to $275.35M, a 120.7% gain.

But on a pro forma basis, net revenue declined from $278.68M to $276.17M, a loss of 4.5%. Pro forma EBITDA was up 12.1%, however, rising from $95.1M to $106.6M.

DickeyCEO stated, “This quarter marked the first anniversary of our transformative merger. We are pleased to report that the integration is largely complete, and our identified synergies were materially exceeded six months ahead of schedule. We are making excellent progress in the turnaround of 10 underperforming stations which account for 100% of our revenue decline, and expect them to post positive revenue growth in 2013.”

Dickey said that revenue for the other 515 stations was flat.

Asked about the troublesome 10 stations, Cumulus reported that they account for 9.7% of CMI revenue. They’re all different, in different markets, and have different issues. Sports rights with the Los Angeles Dodgers and Buffalo Bills were factors, others had various contract issues, some were undergoing sales management overhauls. In Q4, the company will be in the middle innings of the effort to turn them around, and is hoping they start to turn the corner by Q2 2013.

The political category has been less than expected and desired. In fact, during Q3 the company experienced a 10% decline during the quarter v. 2010. Cumulus thought it would be up 20%. However, October has been very good, will bode well for Q4. Now up 5% v. 2010 by year’s end. For those of you keeping score at home, the Q3 total political take was $4.3M. Q4 2012 political income was $12.8M – that’s the number Cumulus hopes to obliterate this year.

Looking ahead mid-range, Dickey expects a flat 2013 and the onset of positive results in 2014. That said, Dickey did not believe it was possible to provide any kind of detailed look at probabilities for 2013.

Cumulus is working on deleveraging. $260M in debt has been repaid, and further deleveraging will be a primary use of the company’s cash flow.

When it comes to acquisitions, there is no great desire to add stations. What acquisitions may occur would be on the content side. And any such investments will be on small scale. Rather, the focus will be on debt paydown.

On the WFME-FM Newark NJ acquisition from Family Stations, Dickey believes there is a possibility of moving the station’s antenna to the Empire State Building alongside its WPLJ-FM. If it does to, it will incur more cost, and that said, the company is very happy with the station’s signal as it is.

Dickey said its legacy stations are performing along the same lines as the radio business as a whole; he noted that the assimilated Citadel stations are still underperforming as they get used to the Cumulus way of doing things.

RBR-TVBR observation: The bottom line: Cumulus has built its juggernaut radio battleship – the fittings it wants are there, and the ship is adequate for getting around, but it suffers from rust here and growing pains there. The near term plan is to perform heavy duty maintenance where required to make it seaworthy, and in particular shovel down the ballast of debt that damages its maneuverability.

The goal is to go from red today, to flat next year, to black by 2014 – let’s see if they can do it.