CEO Berner Sees Cumulus As 'A Winner'

While she says she like radio's odds, there is no denying that the entire media landscape, digital included, is still in the midst of seismic change and there will be winners and losers.

During Thursday's conference call with analysts, Cumulus CEO Mary Berner talked about a number of imperatives designed to turnaround the fortunes of the company.

"What I have heard and learned over the past five months of extensive travel and group and one-on-one interactions with both employees and advertisers simply confirmed what I already believed, which is that while our challenges are formidable, Cumulus certainly has the assets to become one of the winners if given a plan to deal with its operational issues and the time to leverage and build on its considerable strength."

However, she assured analysts she wasn't about to minimize the challenges facing Cumulus.

"As you can see by the continued under performance we experienced this quarter versus our peers, we have a lot of work to do to stabilize the business. We are organizing that work around four foundational issues which I believe are responsible for our under performance, and I will give you some context for the moves we are making to correct Cumulus' trajectory."

She cited:

• First, a well constructed operational plan wasn't or couldn't be executed at Cumulus due to a lack of management tools and information, as well as a misalignment of authority and responsibility across many functions. 
• Second, the company had a corporate culture characterized by a lack of focus, accountability, and collaboration and under-investment in human capital which collectively resulted in significant turnover and economic leakage.
• Third, revenue was meaningfully impacted by multi-year declines in ratings across the entire platform in part due to a command and control operating strategy that often ignored local market dynamics. 
• And finally, a substantial amount of leverage on the balance sheet has reduced the company's capital flexibility while increasing the pressure to execute in operational turnaround quickly.

To address these issues Berner talked about programming being returned to the local markets.

Mary Berner

"For instance, after we eliminated our nationally-mandated music list and clock strategies in October, our local Los Angeles programmers began to tailor their music and clock setup to their own market. In November, they launched a small digital and social marketing campaign along with a cash contest to support their new tactics. These changes along with the addition of a new Midday talent have helped propel the station from 0.3 rating with men in April 2015 to a 0.6 rating in January.

"In Nashville, our country station WSM-FM took over the number one spot in country in January after we started to localize the music in October, adjusted our clocks and got more competitive with our morning show. These positive moves came specifically from returning authority to our local country program director.

"In D.C. in November, we brought back Jack Diamond during Morning Drive, reversing a corporate decision to remove him in 2013. Jack's departure was arguably symptomatic of an over-zealous focus on expense reduction without accurate analysis of the potential revenue impact. And in D.C.'s case, the result was dramatic, this decline in revenue. After bringing Jack back and adjusting the music strategy on the station Mix 107.3 is showing some very early, but encouraging signs in the February ratings weekly rating."

As for the challenges Cumulus is facing with the balance sheet, Berner said,  they "are significant and we are reviewing all available options to maximize value for the company and give us the time and the operational runway needed to turnaround the business."

"We will continue to explore additional opportunistic debt reduction strategies similar to the discounted term loan prepayment we executed in December, which extinguished approximately $65 million face value of first lien term loan for only $50 million.

"Additionally, we are relentless in our valuation of cash use through the same highest and best use lens and we also continue to explore ways to shed non-core or non-strategic assets or otherwise reduce non-value-producing cash outlays. Unfortunately, we do not have anything remaining that is immediately actionable and individually as large as the prospective LA or D.C. land sales. But we were able to in the last three months generate $10 million collectively from our sale of our corporate aircraft as well as the divestiture of our two trust stations that are currently under contract. Also, by choosing not to execute our call option for KSJO-FM in San Jose, we avoided approximately $8.5 million of cash outlay that otherwise would have been expended into April."