CMLS

Cumulus Media Inc. (CMLS)

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Cumulus Media (CMLS)

Q2 2009 Earnings Call

August 05, 2009 11:00 AM ET

Executives

Lewis W. Dickey, Jr. - Chairman, President and Chief Executive Officer

J.P. Hannan - Vice President, Controller and Interim Chief Financial Officer

Analysts

David Bank - RBC Capital Markets

Peter Gingold - Angelo, Gordon & Co.

Presentation

Operator

Ladies and gentlemen please stand by, we are about to begin. Hello and welcome to the Cumulus Media 2009 Second Quarter Earning Release Conference Call. At the request of Cumulus Media to 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 result expressed or implied in these forward-looking statements due to various risks, uncertainties or other factors. I would now like to introduce Mr. Lewis Dickey Chairman and CEO of Cumulus Media. Sir you may begin

Lewis W. Dickey, Jr.

Thank you operator and good morning everybody. I appreciate everyone taking the time to receive an update on our performance. I'm joined today by our interim CFO, J.P. Hannan.

This morning we're going to update you on our second quarter performance and briefly discuss our results for July. Starting with second quarter results our revenue for all markets was down 21.1%; $66 million. This is slightly better than the revenue pacing data that I shared with you during our Q1 earnings call which at the time was down approximately 24%. Revenue weakness continue to be fairly broad based across all categories however and automotive represented about 35% of our total decline on a dollar volume basis.

As I've mentioned in the last two calls going into the year we undertook an extensive review of our fixed cost structure in the face of this declining revenue picture. Consequently we sought to reduce our overall fixed cost during the year or for the year by 15%, primarily through the implementation of a proprietary technology platform that we've been working very hard to develop over the past two years. That platform is now being rolled out and consequently it’s enabled us to reduce headcount and increase operational efficiency, even to a greater degree that our original estimates had set out.

Due to the revenue results in the first couple of quarters, we continued on this on our fixed cost analysis and implementing this technology platform taking additional measures again through the first half of 2009. As a result of these efforts we finished Q2 with total operating expenses down 25.9% for the quarter, again this was ahead of our expense guidance which was down 15 to 20%.

And this was -- and again this is primarily the result of this technology platform actually proving to be more powerful and robust than we originally anticipated. Moving down the income statement our Q2 adjusted EBITDA was down 14.7% to $23.4 million. And it resulted in free cash flow for the quarter of $14.4 million. The resulting EBITDA margin of -- which would be an LTM EBITDA margin of 35.4% for CMI which remember has a medium market size of about a 100-150, which we believe is the second highest EBITDA margin in the business today; behind only our sister company Cumulus Media Partners, which is at 40.5%.

And for our lenders we'll go -- and for CMP lenders we'll go into more detail about CMP on our quarterly call for those constituents coming up at noon today.

Now as of June 30, we are sitting on a cash balance of approximately $13 million after making a $32.5 million voluntary debt repayment that accompanied the closing of our amendment to the credit agreement. The major points of the credit agreement which we had indicated in the previous filings in essence is a covenant suspension period until March 31, 2011. Our lending covenants -- when the covenants resume from the credit agreement back at 6.5 times.

Also included in that is the minimum EBITDA requirements of 60 and $66 million that phase-in throughout the period of that extension, and minimum liquidity requirements of $10 million. This amendment provides us with greater operating flexibility as we continue to navigate through this challenging economic environment and again it was the product of a very constructive and mutually beneficial process with our lenders.

The sole purpose and priority of Cumulus Media right now is to repay its credit agreement and we're working diligently to make progress on that on a monthly basis.

Now looking ahead our July revenue finished down approximately 19.8%, we continue to see some sequential improvement. And operating expenses for the quarter, again our guidance is going to be the same as our guidance was in Q2, which is down 15 to 20%.

Consequently we expect Q3 to improve upon Q2's performance on a year-over-year basis. Our team is highly focused on executing our strategy and implementing our technology platform and I want to commend our team for their ability to lead the industry in EBITDA margins and most importantly in defending our cash flow which remains our top priority at this point in the business cycle.

Now I'm going to turn over to J.P. Hannan our Interim CFO is going provide you with financial overview and then we'll open it up for questions, thank you

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