Cumulus CEO: Turnaround To Take Years

Cumulus Media Inc. Thursday announced operating results for the three months ended March 31, 2016.

• Net revenue of $268.5 million, down 0.9% vs. the quarter ended March 31, 2015
• Adjusted EBITDA of $41.9 million, down 6.1% 

“We are in the early stages of a multi-year turnaround,” said Mary Berner Chief Executive Officer of Cumulus Media Inc..  “Our first quarter results and second quarter pacings are consistent with the considerable challenges we must overcome.

However, we are seeing some signs of progress in each of our turnaround initiatives - enhancing operational blocking and tackling, instituting a strong and positive culture, and driving improved ratings.”

During Thursday's earnings call, Berner told financial anaylysts, "Our continued underperformance highlights the challenges that we are addressing, challenges that are significant, but fixable with time. In the same way that our company's issues did not develop overnight, they won't be fixed overnight either. We are starting to make identifiable and significant progress on our turnaround strategies."

One area of the turnaround efforts is fixing the culutral clmite at Cumulus.  Berner stated, "it's hard to over state the impact our new cultural values framework has had. The word FORCE which stands for Focused, Responsibility, Collaboration and Empowerment has become a railing cry across the company. I'm not surprised that the organization has embraced FORCE, but the speed and depth of the buy-in has been both surprising and heartening. I know from experience that this kind of momentum does not develop without an employee base that is eager to embrace change.

"Of course, it should also go without saying, the cultural change is not a one-shot deal. If these new cultural drivers are really to move the bottom line, they have to be institutionalized and continuously reinforced through consistent communication and tactical efforts."

Berner added year-to-date our numbers are encouraging. On an annualized basis through April, total turnover at Cumulus was reduced to 29% from 34% in full-year 2015 and 36% during the same period in 2015. Our full-time turnover was down to 23% from 30% in full-year 2015 and 32% during the same period in 2015.

Updating some early rating successes in KLOS in LA, WSM in Nashville, and WRQX in Washington DC citied during the last conference call. Berner reported similar successes.

She cited:

• WFTK 96.5 FM in Cincinnati moved up from tenth to fourth in its target demo since October due solely to the station's ability to act locally instead of its hearing to a nationally mandated playlist. According to our rock format specialist "the market sometimes calls for blue collar rock versus alternative rock." Simply being more in touch with the local market music environment and allowing the station to make those changes on its own has reaped meaningful benefits quickly.
• In Houston, "we stand alone with one large FM station in KRBE. We've got a great product but we lack the ability to package with other assets in the market. So we're vulnerable against our competitors who have large clusters. It's incredibly important that we always have a rating story to tell. So Kirby was a natural choice for high impact investment funds. As a result of our funding of KRBE's well crafted new programming initiative, including changes to music strategy, to clean up our clocks and reduce clutter, listener's share was up nearly 30% year-over-year in Q1 and the station is pacing up 36% in Q2 on the strength of improved ratings."
• In Grand Rapids on WLAV-FM, the local strategy was completely revisited by a program director who felt he had his hands tied before. Changes across the board were made to music, imaging and staff set placement resulting in a tri-sector of growth in AQH, time spent listening in CUME. This is a rare achievement which indicates the stations changes the resonating meaningfully in the marketplace.

She added, "To be clear, our early efforts and most of our high impact investments to-date have been in the PPM markets, which make up about half of the revenue generated at the station group."

As for non-PPM markets, Bern says recovering would be slower. "We naturally expect it will take longer for our diary markets strategies to take hold as we will need to make positive changes over a significantly longer period of time to get the ratings benefits. As we sit today, our four-book markets and our two-book markets, which collectively represent 46% of radio station group revenue, are still indexing with mid- to high-single digit declines year-over-year."

Other call highlights:

Local spot remains choppy, but at this stage of the turnaround, Berner would not have expected to see any meaningful financial impact.

As for Westwood One: It is facing difficulties in the second quarter currently pacing down high-single digits, "with virtually all upfront account in at this stage we saw a pretty meaningful weakening demand in the scatter market with limited dollars in the pipeline in relation to what we saw during the same period a year prior."  Berner noted, the sales team at Westwood One is relatively new on the job, "but more than that the strategy was essentially to build a team that almost exclusively services the transactional direct-to-agency business. And the vast majority of the revenue that we generate today comes from this transactional process."

Additionally, Bern told analysts that Cumulus continues to look at non-strategic areas of the business that burn cash flow. She cited, "we discontinued the print version of NASH Country Weekly in favor of a digital version, which we're calling NASH Country Daily. And the economic profile for us here is very, very favorable."