Cumulus Media Inc. (CMLS)

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Cumulus Media Inc. (CMLS)

Q4 2008 Earnings Call Transcript

March 16, 2009 4:30 pm ET


Lew Dickey – Chairman, President and CEO

Marty Gausvik – EVP, CFO and Treasurer


Marci Ryvicker – Wachovia Wells Fargo

Sean – RBC Capital



Hello and welcome to the Cumulus Media 2008 fourth quarter earnings release conference call. At the request of Cumulus Media, this conference is being recorded for instant replay purposes. Please note that certain statements in today’s press release and discussed on this call, may constitute forward-looking statements under the federal securities laws. These statements are based on management’s current assessments and assumptions and are subject to a number of risks and uncertainties. Actual results may differ materially from the results expressed or implied in these forward-looking statements due to various risks, uncertainties or other factors. I would now like to introduce Mr. Lew Dickey, Chairman, and CEO of Cumulus Media. Sir, you may begin.

Lew Dickey

Thank you, operator, and good afternoon everybody. I appreciate you taking the time to receive an update today on our performance. I’m joined by our CFO, Marty Gausvik. I apologize in advance for the quality of the audio as I am on cell phone for this call. This afternoon, we are going to update you on our fourth-quarter performance and provide guidance for the first quarter of 2009. Starting with Q4 results, our pro forma cash revenue for all markets is down 10.2% to $70.8 million. This was squarely with our guidance of down 9% to 11%. Operating expenses for the period were down 9.2% well ahead of our guidance of down 5% for an OpEx for the period. On the top line in Q4 we have five markets, which posted a double-digit revenue increases. Now, weakness in the quarter stemmed from the obvious categories of automotive, financial services, home-improvement, and furnishings, and then retail in general. Moving down the income statement, our pro forma adjusted EBITDA for Q4 was down 16.6% to $22.8 million. Our free cash flow however declined almost 6.4% to $13.8 million, due primarily to the decline in revenues. As of the end of February, we are sitting on a cash balance of approximately $57 million.

Now looking ahead as we talk about the first quarter, our pacing which is the information that I will give today here we are in March 16. Our pacing is currently down 25% for Cumulus Media. For the end of the year, we undertook an expensive review of our fixed cost structure however in the face of this declining revenue fixture. And as a result, we reduced our overall fixed cost by 15%. These cost cuts were primarily the result of the implementation of proprietary technology, enterprise software that we have been developing over the past few years that has enabled us to reduce headcount and increased operational efficiencies. As a result, we expect our operating expenses for the first quarter of 2009 to be down 15%. Now I’m going to turn it over to Marty Gausvik, who’s going to provide you with a financial overview and then we’ll open it up for questions. Marty?

Marty Gausvik

Thanks, Lew, and good afternoon everyone. During Q4, net cash revenues were down 10.5% on an actual basis and down 10.2% on a pro forma basis after giving effect to the sale of our Caribbean stations in November 2007. During Q4, we have seen an acceleration in revenue declines, which is directly correlated to the current economic downturn. Station operating income was down $4.5 million or 14.3% on an actual basis and $4.4 million or 14.2% on a pro forma basis to $26.8 million during the quarter. EBITDA decreased by $4.6 million or 16.8% on an actual basis and decreased $4.5 million or 16.6% on a pro forma basis, when compared to the prior year finishing the quarter at $22.8 million. Station operating expenses decreased by 9.2% during the quarter to $48.3 million, the decline was primarily attributable to a decrease in program expenses, decrease in marketing and promotional expenses and a decline in commission expenses associated with the revenue decline. Based upon the cost cuts we implemented at the beginning of the year, we expect station-operating expenses to decline by approximately 15% during the first quarter of 2009.

For the quarter, total corporate overhead was up ever so slightly at $4 million and it is anticipated that corporate expenses will hold at that level during 2009, for Q1 ’09. Moving on to free cash flow, for Q4 we produced $13.7 million in free cash flow, compared to $14.7 million during the prior year. We offset most of the decline in EBITDA through a reduction in interest expense and just for your information, free cash flow is defined as EBITDA, less net interest expense, less LMA fees, less maintenance CapEx, and less cash taxes, which we had none.

Moving on to capital expenditures, we’ve really trimmed back on our CapEx, we had $6.1 million of CapEx for the year, however in Q4 we only spent $0.9 million and we were looking to cut that into half in 2009 and we are looking to spend no more than $3 million in CapEx and we may even spend less than that. Moving on the balance sheet, our leverage breaking ratio as defined in the credit agreement was 7.4 times at year-end compared to the 8.5 times covenant. Leverage net of our year-end cash balance of $53 million was 6.87 times and our interest coverage ratio for the year was about 2.52 times, so we were covering our interest very well and it’s one of the reasons we are still generating a significant amount of free cash flow. With that I would like to open up the call for questions.

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