Tuesday, November 11, 2014

Lew Dickey: Cumulus 3Q Revenue 'Essentially Flat'

Lew Dickey
During Monday's late afternoon earning conference call, CEO Lew Dickey termed Cumulus' revenue performance during the 3Q as 'essentially flat' and told anaylysts he's ia currently touring markets to address revenue concerns. He said he's visited 21 markets in the past 60-days "working with teams...on our sense of urgency, preparedness and go-to-market strategies for 2015."

Conference Call highlights:
  • Revenue:  "The third quarter was a continuation of the cyclical downturn in ad spend that we experienced in Q2, and now appears to be abating as we make our way through Q4. More specifically, in the third quarter, our pro forma net revenue for the period was essentially flat at $313.9 million."
  • Generational Shift:  Dickey stated the company is working its way through, what he called, 'a generational shift' in key morning talent at four top-billing stations, which were acquired from Citadel. These stations are KLOS in Los Angeles, where Mark & Brian were on the station for 25 years; WPLJ in New York, where Scott Shannon was on the station for 23 years; WRQX in Washington, where Jack Diamond was on the station for 24 years (and recently re-hired for morning on WLS-FM); and WLS-AM in Chicago, where Don and Roma were on the air for 28 years until Don Wade's passing. Dickey compared the morning show generational shift to having Jay Leno, David Letterman and Larry King all on one network with all shows being transitioned virtually at the same time. Naturally, each of the 4 shows represents a different set of circumstances, but the inevitable transitions are disruptive to both ratings and revenue.
  • Success Story: Dickey cited Los Angeles, where a new show, Heidi and Frank, replaced Mark & Brian about 24 months ago. According to Dickey, the new show's ratings have been climbing steadily and are now back to the levels of the 25-year heritage Mark & Brian show that they replaced. Consequently, KLOS is expected to increase cash flow by $1.5 million to $2 million in 2015, recapturing more than the approximate $1.25 million in year-over-year decline of cash flow against prior year in 2014.
  • WestwoodOne: Network integration continues on schedule and will be fully executed by year end. He said the expected cost synergy target of $25 million in this calendar year will be achieved. A key driver of the 2015 synergies is the exciting new news and information product we are producing through our 7-year content deal with CNN.
  • NASH:  Cumulus will also begin to offer NASH affiliations through Westwood One beginning next year. In addition, NASH ICONS is now available in 16 Cumulus markets.
  • Success Story:  Dickey reported that the flagship NASH ICONS format is in Nashville on WSM-FM, which has now gone from third to first among the market's 3 country stations in a very closely watched battle for country music radio.
  • Music Choice Partnership:  Dickey told analysts the newly-announced strategic partnership allows for important, in-home distribution of the NASH brand, while also providing another outlet for country fans nationwide to access the NASH music and lifestyle content that we are capturing and curating daily.
  • Real Estate:  Cumulus has completed the site diligence process on the sale of its noncore property in Los Angeles and are now under firm contract. The purchase price for the property is $125 million. Due to zoning requirements in Los Angeles, the closing process is expected to occur in the next 12 to 18 months, if not sooner. The company also commenced the process for the sale of its Bethesda, Maryland property, about 75 acres, which is expected to close in 2015. "When combining these land sales with the previous sale of our stake in the San Francisco Giants, as well as various smaller stations in divestiture trusts, we reiterate our expectation that noncore asset sales will yield $200 million of proceeds by the end of  '16, all of which will be used to repay debt."
  • The Future: Dickey commented that he's seeing progress in the specific business units that have been a significant drag on earnings for much of the year as stabilizing local market conditions, ratings improvement and better overall sales execution all are gaining traction. Political advertising was pacing in line with 2012 through September, but closed much weaker than anticipated in October and early November. According to Dickey, Cumulus will realize more than $19 million this year as compared to just over $23 million in the 2012 cycle. The second half of the quarter is strengthening as we gear up for the holiday season ahead. Q4 net revenue, he believes,  will finish between $331 million and $335.5 million, versus $328.3 million a year ago. 
  • Chicago:  He expects the market will be a tremendous contributor in terms of its growth rate in 2015 and will be actually in fourth quarter. "And I just believe, as we see these and go through them one by one, these stations have, in essence, troughed, and so we've got -- and the financial performance of the stations is -- has yet to catch up with some of the ratings improvement that we've seen."

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