Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cumulus Media Inc (NASDAQ:CMLS) outperformed its peers on key metrics such as cost takeouts, IEDA margin recovery, free cash flow conversion, net leverage, and liquidity through the end of 2023.
• The digital marketing services business saw a revenue increase of 27% year over year, becoming the largest digital business segment in 2024.
• Cumulus Media Inc (NASDAQ:CMLS) achieved all-time highs in several key performance indicators for its digital marketing services, including customer count up 18% and average digital order size per customer up 11%.
• The company successfully extended its debt maturities to 2029, providing additional financial flexibility and optionality.
• Cumulus Media Inc (NASDAQ:CMLS) maintained its liquidity position at year-end versus the prior quarter, benefiting from cash generated from operations.

Negative Points

• Cumulus Media Inc (NASDAQ:CMLS) faced significant challenges due to accelerated national headwinds and an industry-wide slowdown in local broadcast advertising.
• Podcast revenue was down slightly in 2024 due to Daily Wire's decision to take its ad sales function in-house, resulting in a $15 million negative revenue comp for the full year.
• The streaming business was down 4% during the year, impacted by the expiration of a fixed rate sales contract.
• Broadcast demand weakness continued, reflecting ongoing concerns about inflation, higher interest rates, and deteriorating consumer sentiment.
• The company anticipates additional headwinds in 2025 due to the loss of Dan Bongino's radio show and podcast, comparable to the loss of the Daily Wire comp.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with CMLS.

Q: What do you think is needed to turn around national advertising? A: Mary Berner, President and CEO, explained that the declines are driven by external macroeconomic factors. Improvement in these external factors would likely help, particularly for Westwood One, which has been hit hard due to its 100% national business model.

Q: Are there specific categories tied to interest rates that account for the weakness in broadcast spots? A: Frank Lopez Balbella, CFO, noted that the decline is broad-based but particularly affects sectors like automotive, due to affordability and financing issues, and mortgage products. However, financial services, especially auto insurance, have shown relative outperformance.

Q: Can you provide insights into the margins of the Digital Marketing Services (DMS) segment and expectations for 2025-2026? A: Frank Lopez Balbella stated that the unit contribution margins for DMS are approximately 35%. Investments are focused on people rather than technology, aiming for immediate ROI, which is expected to improve margins over time.

Q: How is Cumulus approaching podcasting as a growth area, especially after recent adjustments? A: Mary Berner highlighted that growth in podcasting will come from adding new shows, expanding current ones, and developing new partnerships. The company also plans to expand into video for some podcasts to drive growth.

Q: What is Cumulus' perspective on media deregulation and its potential impact? A: Frank Lopez Balbella expressed support for deregulation, particularly raising caps, which could lead to increased activity and new entrants in the industry. Cumulus is open to exploring opportunities that deregulation might present.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.