Cumulus Media CEO Mary Berner has a tremendous uphill climb, tackling several issues at once to improve the company’s financial performance and its culture. In her meetings with employees, advertisers and others she’s learned “radio is in the midst of seismic change and there will be winners and losers.”
In announcing the company’s earnings, she was forthright with analysts and didn’t over-promise.
We’ve reported Berner has re-organized the company structure to facilitate collaboration and break down silos between divisions. She gave control back to local markets, with “checks and balances” to ensure the dramatic change didn’t negatively impact something, she told analysts on Thursday.
The re-org allowed the company to “extract costs and eliminate inefficiencies.” An example is Cumulus was about to spend money on a satellite distribution system to support a new network in Arkansas. They found Westwood One already has the capacity to do that, eliminating that expense.
Berner sold the corporate jet for just over $6 million to create a pool for employee merit increases – the first such increases in 10 years, she said.
Decisions are being made faster due to the re-org and something else. It used to take weeks and months for employees to get responses back from corporate on their queries. Now calls and emails are answered within 48 hours. “That simple change has resulted in strong feedback,” according to Berner who said in a company survey taken in January, 89% of employees felt the company is changing for the better.
However years of cuts have taken their toll, both in ratings and revenue. The programming department was regularly starved, she said, noting that in 2015 Cumulus spent less than 4/10ths of one percent on promotion — “not enough to support growth.”
Half of the company’s revenue comes from PPM markets, where listening has declined over four years. Diary markets showed “meaningful ratings decline” as well.
Of both the ratings and the company culture, when pressed by analysts for specifics, she said it’s going to take time to deliver measurable results. The problems occurred over time and it will take time for the improvements to take hold.
The company is still expecting big chunks of change for two sales of heritage AM tower locations. Cumulus expects the $125 million sale of the KABC AM site in Los Angeles to close by year-end. The WMAL(AM), tower site in suburban Maryland is not as far along. It’s under contract with Toll Brothers, who plans to build luxury homes on the site. How many they can build determines the ultimate sales price, which can go as high as $95 million. Cumulus has been using $75 million in its modeling.
For the fourth quarter, Cumulus reported net revenue of $308.8 million, down 6.2% from the same period a year ago. Adjusted EBITDA was $63.0 million, down 30.3%.
For the year 2015, net revenue dropped $94.7 million, or 7.5%, to $1,168.7 million compared to $1,263.4 million in 2014. The company cited drops of $58.3 million, $16 million, $15.9 million and $4.5 million in broadcast advertising, digital advertising, political advertising and license fees and other revenue, respectively.
Declining ratings hurt its national spot sales and its largest competitor has strategically shifted its focus towards national advertising clients, resulting in lower market share and revenues for us and the remainder of the industry.
Winding down its ad relationship with Rdio hurt digital sales.
