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| 8-K - 8-K - CUMULUS MEDIA INC | cmls-20160930investorrelat.htm |
November 8, 2016
CUMULUS MEDIA INC.
2016 Third Quarter
Earnings Call Presentation
Safe Harbor Statement
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this presentation may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform
Act of 1995 and other federal securities laws. Such statements are statements other than historical fact and relate to our intent, belief or current
expectations, primarily with respect to our future operating, financial and strategic performance. Any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties. Actual results may differ from those contained in or implied by the forward-
looking statements as a result of various factors including, but not limited to, risks and uncertainties relating to the need for additional funds to
service our debt and to execute our business strategy; our ability to access borrowings under our revolving credit facility; our ability from time to
time to renew one or more of our broadcast licenses; changes in interest rates; changes in the fair value of our investments; the timing of, and our
ability to complete, any acquisitions or dispositions pending from time to time; costs and synergies resulting from the integration of any completed
acquisitions; our ability to effectively manage costs; our ability to effectively drive and manage growth; the popularity of radio as a broadcasting and
advertising medium; changing consumer tastes; the impact of general economic conditions in the United States or in specific markets in which we
currently do business; industry conditions, including existing competition and future competitive technologies and cancellation, disruptions or
postponements of advertising schedules in response to national or world events; our ability to generate revenues from new sources, including local
commerce and technology-based initiatives; the impact of regulatory rules or proceedings that may affect our business or any acquisitions; our
ability to continue to meet the listing standards for our Class A common stock to be listed for trading on the NASDAQ stock market; the write-off of
a material portion of the fair value of our FCC broadcast licenses and goodwill from time to time; or other risk factors described from time to time in
our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”)
and any subsequent filings. Many of these risks and uncertainties are beyond our control, and the unexpected occurrence or failure to occur of any
such events or matters could significantly alter the actual results of our operations or financial condition. Cumulus Media Inc. assumes no
responsibility to update any forward-looking statement as a result of new information, future events or otherwise.
2
CUMULUS MEDIA INC.
2016 Third Quarter
Earnings Call Presentation
3
Enhance
Operational
Blocking & Tackling
1
Institute Culture
Initiatives
2
Drive
Ratings
Growth
3
Three Key Initiatives:
4
Enhance
Operational
Blocking &
Tackling
5
Enhance
Operational
Blocking &
Tackling
Key Elements
Logical realignment of authority and accountability
Recruitment of accomplished senior executives
Alignment of senior executive compensation
Deliberate shift of decision-making to local leaders
48-hour email / phone call response requirement
Addressing of legacy systems challenges
6
Institute
Culture
Initiatives
7
Institute
Culture
Initiatives
WE ARE FOCUSED.
We will make every decision, including
where we direct our own work efforts,
through the lens of HABU (Is this the
HIGHEST AND BEST USE of our
resources — our people, our time, our
energies and our money?) and will
ensure that we have a thoughtful plan
to execute each decision and activity.
WE ARE RESPONSIBLE.
We will operate as a transparent and
performance-based company, with all
of us taking responsibility for our
efforts and outcomes, celebrating our
successes and their shepherds, and
owning up to — and learning from —
our failures.
WE ARE COLLABORATIVE.
We will work across departments and
disciplines to proactively support each
other’s efforts and endeavors. Silos will be
replaced by community; secrets and
unresponsiveness supplanted by
constructive communication and
responsiveness to each other’s needs. We
will work as a team with shared goals and
successes.
WE ARE EMPOWERED.
We will be empowered as individuals,
valued for, and supported in the unique
contributions we each can make. Without
exception, we will contribute our talents
and time to meeting challenges, fixing
problems and rising to the opportunities
before us. We will become more
empowered individually, and therefore
more powerful as a whole.
8
Institute
Culture
Initiatives
Tangible Evidence of Improvement…
“Excited for the future”
86%
“Proud to work at Cumulus”
92%
“Changing for the better”
94%
Comparison shown from January 2016 culture survey to May 2016 culture survey of employees
84%
87%
89%
9
34%
36%
25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Total Turnover
A
n
n
u
a
l
i
z
e
d
T
u
r
n
o
v
e
r
2015 Full Year 2015 Sept YTD 2016 Sept YTD
Institute
Culture
Initiatives
Year-to-Date Turnover (Through Sept. 2016)
30% 30%
20%
Full-Time Turnover
A
n
n
u
a
l
i
z
e
d
T
u
r
n
o
v
e
r
2015 Fu Yea
36%
40%
24%
Voluntary Sales
Turnover
A
n
n
u
a
l
i
z
e
d
T
u
r
n
o
v
e
r
10
Drive
Ratings
Growth
11
Drive
Ratings
Growth
Reorienting
of Corporate
Resources
to Support
and
Analytical
Functions
Financial
Reallocation
Toward
High-Impact
Stations
Return of
Authority to
Local
Markets
12
Jan-12, 100
Mar-15, 73
Sep-16, 88
70
75
80
85
90
95
100
105
Drive
Ratings
Growth
PPM Market Ratings (Indexed to Jan. 2012)
Sources: Nielsen, BIA; Calculated as a trailing three month average of Nielsen’s P25-54, M-F, 6a-7p
AQH ratings for Cumulus stations, weighted by market size, averaged across markets and indexed
to January 2012
PPM markets
represented ~53% of
Radio Station Group
Net Revenue in 2015
13
Su15, 82
Su16, 76
Fa11, 100
Sp15, 88
Sp16, 84
70
75
80
85
90
95
100
105
4-Book Markets
2-Book Markets
Drive
Ratings
Growth
Diary Market Ratings (Indexed to Fall 2011)
Sources: Nielsen, BIA; Calculated as Nielsen’s P25-54, M-F, 6a-7p AQH ratings for Cumulus stations,
weighted by BIA market size, averaged across markets and indexed to the Fall 2011 ratings book
Diary markets
represented ~46% of
Radio Station Group
Net Revenue in 2015
14
Unforeseen
Clean-up Items
Relating to
Prior Years
1
Years-Long
Lack of
Investment in
Systems,
People and
Capital Items
2
Annual
Contractual
Cost
Escalation
3
Unpredictable
and
Challenging
Industry
Conditions
4
Unavoidable Hurdles Impacting Turnaround:
15
$289.4 $286.1
$-
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
3Q15 3Q16
N
e
t
R
e
v
e
n
u
e
(
$
m
m
)
Q3 2016 Financial Highlights
Net Revenue Commentary by Segment
Radio Station Group:
• Net revenue grew 0.7% year-over-year
• Political and slight share growth drove revenue
growth
Westwood One:
• Net revenue declined 5.5% year-over-year
• Revenue performance impacted by adverse industry
conditions, somewhat offset by slight share growth
Net Revenue Performance
16
$(542.2)
$46.3
$(600.0)
$(500.0)
$(400.0)
$(300.0)
$(200.0)
$(100.0)
$-
$100.0
3Q15 3Q16
N
e
t
I
n
c
o
m
e
/
(
l
o
s
s
)
(
$
m
m
)
Q3 2016 Financial Highlights (cont’d)
Net Income / (Loss) Performance
17
$70.6
$58.2
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
3Q15 3Q16
A
d
j
u
s
t
e
d
E
B
I
T
D
A
(
$
m
m
)
Q3 2016 Financial Highlights (cont’d)
Expense Commentary by Segment
Radio Station Group:
• Expenses grew $8.3 mm year-over-year
• Expense growth driven by new sports rights fees, an
increase in music license fees and the high impact
programming investment strategy
Westwood One:
• Expense increase largely driven by $14.4 mm related
to resolution of certain contract disputes with CBS
• Expenses were flat, excluding CBS resolution costs
Adjusted EBITDA Performance
(1) 3Q16 Adjusted EBITDA includes the addback of $14.4 mm for resolution of CBS contract disputes 18
• Overall pacing down low single digits
― Radio Station Group pacing up slightly due to political
― Westwood One pacing down mid-to-high single digits
• Choppy market environment appears to be continuing in Q4 given
uncertainty of political spending
Q4 2016 Pacing
19
Four Key Operational Initiatives:
Enhance
Operational
Blocking &
Tackling
1
Institute
Culture
Initiatives
2
Drive
Ratings
Growth
3
Improve Sales
Execution
4
20
Improve
Sales
Execution
Systemic sales execution challenges
Poor recruitment and failure to provide training
Lack of sales marketing and support resources
Unable to execute on local-to-national strategies
Revenue generation inhibited by sales systems
Limited measurement of sales productivity
Numerous sales process inefficiencies
21
Improve
Sales
Execution
Sales Productivity
Measurement
Sales
Support
Processes
& Systems
Unique Selling
Proposition
Recruitment
& Training
22
• Significant challenges faced in regards to the balance sheet
• Operational and P&L impact from our over-levered capital structure is
real and will continue to limit our turnaround potential
• Continuing dialogue with key stakeholders to explore strategies
intended to reduce debt and secure runway
Continued focus on addressing our debt…
23
APPENDIX:
Financial Summary &
Reconciliation to Non-GAAP Term
24
Non-GAAP Financial Measure
Definition of Adjusted EBITDA
Adjusted EBITDA is the financial metric utilized by management to analyze the cash flow generated by our business. This measure isolates the
amount of income generated by our core operations before the incurrence of corporate expenses. Management also uses this measure to
determine the contribution of our core operations to the funding of our corporate resources utilized to manage our operations and our non-operating
expenses including debt service. In addition, Adjusted EBITDA is a key metric for purposes of calculating and determining our compliance with
certain covenants contained in our credit facility. We define Adjusted EBITDA as net income (loss) before any non-operating expenses, including
depreciation and amortization, stock-based compensation expense, gain or loss on sale of assets or stations (if any), gain or loss on derivative
instruments (if any), impairment of assets (if any), acquisition-related and restructuring costs (if any) and franchise and state taxes. In deriving this
measure, management excludes depreciation, amortization, and stock-based compensation expense, as these do not represent cash payments for
activities directly related to our core operations. Management excludes any gain or loss on the exchange or sale of any assets or stations and any
gain or loss on derivative instruments as they do not represent cash transactions nor are they associated with core operations. Expenses relating
to acquisitions and restructuring costs are also excluded from the calculation of Adjusted EBITDA as they are not directly related to our core
operations. Management excludes any non-cash costs associated with impairment of assets as they do not require a cash outlay. Management
believes that Adjusted EBITDA, although not a measure that is calculated in accordance with GAAP, nevertheless is commonly employed by the
investment community as a measure for determining the market value of media companies. Management has also observed that Adjusted EBITDA
is routinely employed to evaluate and negotiate the potential purchase price for media companies and is a key metric for purposes of calculating
and determining compliance with certain covenants in our credit facility. Given the relevance to our overall value, management believes that
investors consider the metric to be extremely useful.
Adjusted EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating activities or
any other measure for determining the Company’s operating performance or liquidity that is calculated in accordance with GAAP. In addition,
Adjusted EBITDA may be defined or calculated differently by other companies and comparability may be limited.
25
Q3 2016
Adjusted EBITDA
Reconciliation
(Dollars in thousands)
The table shown reconciles net
income (loss), the most directly
comparable financial measure
calculated and presented in
accordance with GAAP, to Adjusted
EBITDA for the three months ended
September 30, 2016
Three Months Ended September 30, 2016
Radio Station
Group Westwood One
Corporate
and Other Consolidated
Net income (loss) $ 134,119 $ (10,874) $ (76,924) $ 46,321
Income tax expense — — 32,788 32,788
Non-operating (income) expense, including net
interest expense (2) 59 33,851 33,908
LMA fees 2,481 — — 2,481
Depreciation and amortization 13,653 7,782 522 21,957
Stock-based compensation expense — — 735 735
Gain on sale of assets or stations (94,014) — — (94,014)
Acquisition-related and restructuring costs — 344 (794) (450)
Franchise and state taxes — — 158 158
CBS dispute resolution expenses — 14,365 — —
Adjusted EBITDA $ 56,237 $ 11,676 $ (9,664) $ 58,249
26
Q3 2015
Adjusted EBITDA
Reconciliation
(Dollars in thousands)
The table shown reconciles net (loss),
the most directly comparable financial
measure calculated and presented in
accordance with GAAP, to Adjusted
EBITDA for the three months ended
September 30, 2015
Three Months Ended September 30, 2015
Radio Station
Group Westwood One
Corporate
and Other Consolidated
Net loss $ (388,138) $ (145,344) $ (8,697) $ (542,179)
Income tax benefit — — (60,855) (60,855)
Non-operating (income) expense, including net
interest expense (3) 313 35,510 35,820
LMA fees 2,515 — — 2,515
Depreciation and amortization 15,900 9,092 555 25,547
Stock-based compensation expense — — 12,304 12,304
(Gain) loss on sale of assets or stations (50) — 107 57
Impairment of intangible assets 432,808 132,672 104 565,584
Impairment charges - equity interest in Pulser
Media Inc. — 18,308 — 18,308
Acquisition-related and restructuring costs — 1,079 12,684 13,763
Franchise and state taxes — — (244) (244)
Adjusted EBITDA $ 63,032 $ 16,120 $ (8,532) $ 70,620
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