CMLS

Cumulus Media Inc. (CMLS)

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Cumulus Media Inc. (CMLS)

Q1 2010 Earnings Call Transcript

April 29, 2009 4:30 pm ET

Executives

Lewis Dickey – Chairman, President and CEO

J. P. Hannan – SVP and CFO

Analysts

Marci Ryvicker – Wells Fargo

Scott Van den Bosch – Navigare Partners

Presentation

Operator

Hello and welcome to the Cumulus Media first quarter earnings release conference call. Please note, certain statements in today's press release and discussed on this call may constitute a forward-looking statements under Federal Security 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 like to introduce your host, Mr. Lewis Dickey, Chairman and CEO of Cumulus Media. Sir, you may begin.

Lewis Dickey

Thank you, Operator. And good afternoon everybody. I appreciate everyone taking the time today to receive an update on our progress. I'm joined today by our CFO, J.P. Hannan.

Today we're going to update you on our first quarter performance and briefly discuss our pacing for the second quarter. And let's begin.

Starting with Q1 results, our net revenue for CMI increased 1.8% to $56.3 million. This was slightly better than the revenue pacing data that I shared with everyone during our call – during the Q4 earnings call and it marks the renewed forward progress on our top line, after obviously a year of significant revenue decline.

We continue to see sequential improvements in the key revenue categories I outlined last month, such as auto and national business and now we're beginning to see slight increases on the local advertising as well.

As we've always said, the smaller markets generally take a little bit longer time to come out than the larger markets that we have in the CMP platform. But we are starting to see local rebound here.

Now we continue to reap the benefit of our Radio 2.0 initiative, which includes not only the extensive review and our overall fixed-cost structure that we conducted throughout, in early 2009, but also many years of investment in our proprietary technology platform that we are using very effectively to streamline every aspect of the business.

Now as a direct result, station operating expenses for the quarter were again reduced with a 6%, roughly reduction over the same period last year.

As a result of this revenue growth and strict cost control, our Q1 adjusted EBITDA was up substantially by almost 63% to $12.3 million. We continue to see substantial margin expansion with CMI's LTM EBITDA margin now in excess of 30%.

This ability to fund cash flow at CMI resulted in free cash flow for the quarter of just under $1 million and that was negative a year ago. We are particularly pleased to see our company perform at these levels in what is seasonally, as everyone knows, the weakest quarter of the year.

Now, our total debt is now $624 million and we paid down, that's after we paid down $12.8 million in the past quarter. Our current cash position is $13 million, which means our net leverage is now down to 7.8 times.

We fully expect to be in compliance with our leverage – when our leverage covenant returns in March of next year and that test resumes at 3/31/11. And again, we fully expect to be in compliance at that point and depending upon the strength in political advertising later this year, there's a good possibility that we will actually achieve that number a quarter early or by 12/31 this year.

And when we talk about political, just everybody's clear on that, it's political in 2008, it was $6 million for CMI. And keep in mind that we booked 5/6ths of that or $5 million dollars of that in the third and fourth quarter.

Our CMP platform continues to outperform as well. The revenue on our CMP platform was up 6.2% for the quarter, for Q1 over a year ago. And our EBITDA for the quarter was up 17.4%. So CMP stats are 6.2 revenue, 17.4 on EBITDA.

Now the LTM EBITDA margins for CMP are now up to 41%, including the management fees that are paid to CMI. So, again CMP continues to lead the industry in EBITDA margins and now by an order of magnitude.

So, looking ahead second quarter is currently pacing up 4% for CMI and about 10% for CMP. We continue to see the sequential revenue improvement that began in late Q4 in 2009, we continue to see that play out through 2010 and we look for sequential improvement quarter-over-quarter throughout the year in 2010.

And we're becoming increasingly more optimistic about the year again as we progress into the second quarter and obviously May is one of the largest months of the year.

Finally, during the quarter we announced a new strategic partnership called Cumulus Radio Investors or CRI. And we announced that partnership in conjunction with Crestview Partners, which is a $4 billion private equity fund with a strong media focus and a great deal of experience in the space.

CRI, Cumulus Radio Investors will seek to invest in premium radio broadcasting companies, again that present attractive opportunities for significant long term capital appreciation.

And under the terms of the partnership, Crestview will lead an investor group that will invest up to $500 million in equity together with debt financing that is expected to be available through the capital markets and with that CRI could target acquisitions totally in an excess of $1 billion.

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