Collin Jones - Director, IR Lew Dickey - CEO J.P. Hannan - CFO.

Andrew Gadlin - Odeon Capital Group Lance Vitanza - CRT Capital Group Aaron Watts - Deutsche Bank Amy Yong - Macquarie Michael Kupinski - Noble Financial David Bank - RBC Capital Markets David Phipps - Citi.

Welcome to the Cumulus Media quarterly earnings release conference call. I will now turn the call over to Collin Jones, Director of Investor Relations. Sir, you may proceed..

Thank you, Operator. Welcome all to our first quarter 2015 earnings call. Thank you for joining. Before we kick off, please note certain statements in today's press release and discussed on this call may constitute forward-looking statements under 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 forward-looking statements due to various risks and uncertainties or other factors.

A full description of these as well as financial reconciliations to non-GAAP terms can be found in our press release and Form 10-Q, both of which were filed today at 4 o'clock PM Eastern Time. Joining me today is our Chief Executive Officer, Lew Dickey. Our CFO, J.P. Hannan, joins us by phone as he is recovering from a recent back surgery.

We wish him a very speedy recovery.

Lew?.

Thanks, Collin. Good afternoon, everyone. Thanks everyone for taking time to join us today to discuss our first quarter and guidance for 2Q. On today's call, we will give an overview of our financial results and update on the industry landscape.

We will then give more detail around our three discrete areas of focus, our Station Group, Westwood One and NASH. And finally, we will give you a forward-looking perspective on revenue based upon the current pacing as well as expenses for the remainder of the year.

And I will turn it back over to Collin for an update on our balance sheet as well as our two pending land sales, and we will open it up for questions. First quarter was best characterized as continuation of Q4's choppy environment, resulting from the tepid economic recovery that we are seeing.

Weakness was most prevalent among retail advertisers and we felt it home improvement and auto as well as in the telecom sector. On the revenue side, performance was generally consistent across the three months, January, February and March.

We did see in-month March was anemic and moving down to the details of our financial results, the net revenue for the first quarter of 2015 was $271 million, a decrease of $21 million or 7% over the prior year. Again, as March was very anemic, this was at the low end of the pacing range that we reported on our last call.

Our radio markets were down 3% driven by 4% declines in both local spot and national spot with digital growth of 21%, offsetting these declines slightly, although at a lower contribution margin. On the 54 markets out of our 93 that are measured by Miller Kaplan, they represent about 80% of our Station Group's revenue and cash flow.

Our local spot performance was slightly up against the market for the quarter and up pretty dramatically in the month of March. We have now gained share locally for five straight quarters in those 54 markets. And additionally, we outpaced the market substantially in digital. We are up about 27% in the market, low single in this category.

We've also gained share, I'd say, in the digital realm for the last five quarters, so both local and in digital.

In national spot, we had a good year in 2014 where the market was down 0.5 point and we were up 3.1, but in the first quarter we gave some of that back with -- our performance was down 7.1% in national spot -- in the Miller Kaplan markets, we were down 4% overall. And our markets were down 2.5%.

So in those measured markets by Miller Kaplan, our national was down 7.1% and the markets were down 2.5%. And this was due in part to our over-indexing and political based on our heavy mix in those larger markets of news talk radio stations, which obviously we have a tougher comp off of '14.

Moving over to WestwoodOne, revenue was down 14% for the quarter due to continued sales execution challenges primarily in our New York office.

We're also impacted by a reduction of Rdio user acquisition barter which we will ramp back up with the launch of our Rdio Live in the back half of this year and lastly, by the continued rationalization of unprofitable producer contracts at the network.

Our execution of our synergy realization plan allowed us to meaningfully offset the cash flow impact within the quarter. Later in the call I will give some more specific color on the status of our sales execution strategy that we are employing at the network.

Now, shifting over to expenses, our team is keenly focused on reducing our cost base in order to manage the business more efficiently. On our last call, we guided that our Station Group expenses would be up slightly for the quarter and then flat for the remaining three quarters.

We also guided that WestwoodOne operating expenses would be down about $25 million for the year. Looking back at the first quarter, our Station Group expenses were up $1.7 million and WestwoodOne expenses were down $8 million, again driven largely by lower content cost while cash corporate expenses came in flat.

As an aside, approximately $1 million of sports rights due to the NCAA Final Four were recognized this year in the first quarter versus, because of the way the dates fell, they were recognized in second quarter last year. So a tougher comp this year and then it will be a pick-up in the next quarter.

In general, the integration noise on the expenses is largely behind us and we will give specific guidance on expenses for 2Q as well as the remainder of the year a little bit later in the call.

Now, moving down the income statement, these results yielded EBITDA for the quarter of $44.7 million, which was down $14 million or about 24% from the first quarter of 2014.

While our quarterly revenue of $271 million was behind mean consensus of $283 million, our EBITDA of approximately $45 million was slightly below the mean consensus of $47 million when normalizing for the Final Four phasing.

Now with that overview of the current results, I'd like to give everyone some color into our three main areas of strategic focus; our Station Group, WestwoodOne and NASH. Focus of our Station Group continues to be recruitment, sales execution and driving our ratings performance.

During the quarter, new market managers were brought in in both Chicago and New York. These are key hires that will help drive large P&Ls within our organization. Additionally, the hire of Tom Schurr as Regional SVP, a former iHeart senior executive fills out our Station Group leadership team which is now flatter with greater coverage.

In the quarter, we also brought on Pierre Bouvard, formerly with Arbitron and TiVo, our Chief Marketing Officer. He is tasked with leveraging data and audience insight to enable us to compete more effectively in a fragmented audience advertising landscape.

He's been successful in his previous roles of driving additional revenue by providing advertisers with perspectives on substantial ROI of our medium. And in addition, we recruited Tommy Page from Pandora to lead brand activation through platform sponsorships.

As advertisers continue to look for experience or solutions, we are building products within our platform to address them. I told you on our last call that we would have our team largely in place by the end of first quarter. And I’m pleased to say that we are now competing with our strongest operating team in the history of the company.

It's important to note that we are building this team on an expense neutral basis. In Q2, we expect expenses will be flat and for full-year expenses for the Station Group will be slightly down, a little bit less than what we guided last time around. Finally, we are beginning to see the fruits of our labor on the ratings front.

When indexed against the total ratings performance in the markets where we compete, we will be taking the best ratings to market that we've see in last eight quarters. This could bode well for the back half of the year particularly for higher margin agency business which has been challenged for several quarters.

Some of the highlights, we launched Mancow in the Morning on the Loop in Chicago, an iconic classic rock station. It sparked immediate growth. Morning Drive which is his day part went from 1.5 share in February to a 2.7 share in March.

That's a big jump in a very short period of time and the weekly show continued growth with the full day also growing for a 2.4 to a 3.4. Additionally, the winner book [ph] LS FM grew 23% in ratings for the top 10 performance for women.

When combined with the Merlin Media assets in that market, we now have a very strong cluster that speaks to the benefit of scale in larger markets. In Nashville, WKDF is the number one country station in the market backed by America’s Morning Show.

In Atlanta, our top 40 station Q100 in the winner book came in as number one in its format with three competitors and number two overall of the strong showing from the Bert Show, our marquee Morning Show that is syndicated in a number of markets across the country. News talk WMAL in Washington D.C.

grew tremendously in the last book, both in adults 25-54 as well as with men. Our new sales management is taking advantage of these ratings where our station is beating the market by 500 basis points in sales growth in the quarter.

Our cluster in Cincinnati, in the most recent book celebrates three of the top five rated stations, one of our -- really our best showing that we've had in that cluster since we've added. And DVD and Detroit also show significant increases in the most ratings as well as in Providence where we are 1, 2, and 3.

It's the strongest ratings we've had in that cluster on four years since owning it and it's one of our larger cash flowing markets.

Now moving over to WestwoodOne, we thought it would be constructive to briefly revisit the history of the transaction in order to provide perspective on our current progress and forward expectations, particularly for some of our newer investors.

Prior to the acquisition of WestwoodOne, we were in the network content business with our ownership of the legacy ABC Radio Network which we acquired as part of the Citadel acquisition in late 2011.

While this business had strategic potential, it was substantially sub-scale in a competitive marketplace, particularly against Premier who was twice as large as next competitor. In 2013, it became apparent that WestwoodOne's balance sheet challenges provided an opportunistic scenario whereby we could double down in audio content.

The combination of the two network businesses along with our owned radio markets created integrated national audio content platform consisting of iconic sports, entertainment, news, talk, traffic and information brands distributed in nearly 10,000 broadcast radio affiliates across the country reaching almost 240 million people on a weekly basis.

Now, given the compelling opportunity, we sold small markets to Townsquare Media [indiscernible] the capital to acquire Westwood One.

We announced the signing of the merger agreement in August of 2013, at that time, we intended on closing the transaction as quickly as four to six weeks and unexpectedly the DOJ opened up an investigation into the transaction. This delayed our close approximately five months to mid-December of that year, 2013.

Now in the network space, about 55% of the annual business is written during the upfront season, which really occurs after Labor Day and runs through January of the following year, it's nearly an exact overlap of the DOJ investigation.

That process prevented us from our planned integration over the summer in order to be prepared for the 2014 up fronts. And consequently, both networks had to take their inventory to market separately, which mean we had to essentially operate two separate sales efforts for much of 2014 to both sell and service the inventory.

This in essence dramatically impeded our ability to integrate the asset and it meaningful impacted revenue, particularly in the New York office and contributed to a loss of key sellers that accounted for a large percentage of the business out of that office.

Now, our plan of action to improve Westwood One sales execution is really progressing with the hiring of two key experienced sales leaders in Chicago, Doug Johnston, who started in March and New York, Ron Russo who starts in June. Collectively, we are developing a unified go-to-market strategy and attracting top sales talent to our team.

It's too early to give a revenue projection but we expect to gain traction in the back half of the year in scatter and look for improved showing in the 2016 up fronts. Now as with the station group, we are spending a significant amount of time focused on synergy execution and cost management.

In the first quarter, total network expenses were down $8 million as stated earlier, driven largely by synergy realization and workflow optimization. As we look forward to the second quarter, we expect expenses will be down about $15 million.

For the full year, total network expenses will be down approximately $40 million as we bring our synergy total on the transaction to little greater than $65 million between the realized cost savings in 2014 and 2015.

And moving onto NASH, we're making good progress on the build out of our multi-platform, entertainment and lifestyle brand that targets fans of country music. I'll give you a brief update on some of the key highlights from the quarter.

We're seeing nice momentum with the external syndication of America's Morning Show NASH Nights Live with Shawn Parr and the NASH Icon 24/7 format to complement our existing syndicated products Kickin' It with Kix and American Country Countdown.

America's Morning Show is now on 31 stations and we just signed Orlando, WOTW, as our first major non-O&O affiliate on in April. NASH Nights and Kickin' It with Kix are both on a 100 plus stations with 50% clearance in the top 25 markets and 50% clearance in the top 50 markets.

Our 24/7 NASH Icon is now on over 20 stations nationwide, including the number one country station in Nashville, WSM, which serves as NASH Icon's flagship. Our Country Weekly magazine is the nation's most popular publication targeting country audience. We own that and it will be rebranded NASH Country Weekly in June along with a compelling redesign.

Contemporary look and feel with complement the aspirational nature of the NASH brand and broaden the audience opportunity for both subscription sell-through and advertising dollars. Moving on, our joint venture -- in the record label business with Scott Borchetta's Big Machine Group called NASH ICONS is off to a very good start.

Our first album launch Reba McEntire's Love Somebody went to number one on all the country charts and will generate enough revenue to turn the label profitable after only its first album.

We look forward to releasing new music by country superstars and newly signed NASH Icon artist Martina McBride, Ronnie Dunn, and Hank Williams, Jr., all later this year. Finally, we will be launching in the coming months, our NASH app, which will be a digital content portal housing all things NASH from video to audio to contest.

Look for exciting announcements on this prior to next earnings call. We'll continue to provide updates on NASH as development arise. There is an awful lot going on to continue to build this brand and this platform and we expect a number of very positive announcements throughout the rest of the year as we build NASH.

The brand is gaining momentum with both listeners and strategic partners and again it represents a unique opportunity for us to create value for our shareholders using the Cumulus and Westwood One platforms to leverage basically an audience segment that is a very desirable one for consumer marketers.

Going forward, we'll be providing pacing information, so let's jump to pacing now. Going forward, we'll be providing pacing information for the current quarter as well as expense guidance for the remainder of the year. So current pacing information for the quarter as well as expense guidance for the remainder of the year.

On our last earnings, we indicated Q2 pacings at that time. We are up low-single digits only to experience a dramatic slowdown in bookings in March and April. Currently, our station group is pacing down mid-single digits, with both local spot and national spot are down mid-single digits.

Growth in digital is being offset by expected declines in political revenue for the quarter and the political comp we're up against in the quarter is about $3 million. And moving onto the network. We said on our last call, it will be a tough first half as we work through our sales execution issues.

And currently, Westwood One is pacing down mid-teens similar to its Q1 finish, driven primarily by the New York office as well as the elimination of some unprofitable but revenue generating consumer producer contracts. In total, revenue for the station group and Westwood One combined is pacing down approximately 10% for the second quarter.

On the expense side, for the second quarter, the station group will be flat and Westwood One would be down approximately $15 million. Corporate expenses excluding management bonuses which were not paid last year will be flat to slightly down for the quarter. Total expenses for the second quarter will be down approximately $15 million.

For the full-year, station group will be flat to slightly down, offsetting the increase in expenses in Q1. Westwood One expenses for the full year will be down approximately $40 million and corporate expenses excluding senior management bonuses which were not paid last year will be flat to slightly down.

Total expenses for the full-year will be approximately $40 million as we complete the integration of our business units. Now with that, I'll pass it on to Collin, who will take you through the balance sheet as well as provide an update of our land sales.

Collin?.

Thanks Lew. For the first quarter, there is limited update on the balance sheet. It's the low point of the year from working capital perspective, so our debt levels remain flat from 12/31/2014 at about $2.5 billion.

From a free cash flow perspective, Capex totaled $10.1 million for the quarter, this is a large number from a phasing standpoint, so to break it down, this was driven predominately by $6 million facility move in San Francisco, which we completed within the quarter and there are about $2 million of computer and end of life software upgrades across the broadcast platform that needed to be made along with $2 million of ongoing maintenance and other routine Capex that you would expect.

Capex will be much lower in 2Q and 3Q before ramping up slightly in 4Q as we have another studio consolidation for our Chicago assets that will commence towards year-end relating to acquisition of the Merlin Media stations there.

For the full year, we’ll reiterate what we said on our call last quarter, which is, Capex will be in line with 2014 which was about $19 million for the full year. Turning over to an update on the two land sales in process, starting with LA.

Quick update there, we continue to be on track for $125 million sale of the property under KBC Tower, all the signs from the planning commission and our buyer point positively at this point and we remain on track for a close by the end of Q1 2016.

As we move over to our DC property, since our last call, we've been going through an intensively competitive sales process. We have now selected our choice buyer and are currently working through formal documentation.

Our process and structure was designed to get as much cash as possible by the end of 2015, while also maximizing full value for the property long term.

We are very pleased with the value that will be delivered from this non-core asset, we'll entering into the customary 60 day study period here shortly and we expect to announce more details of the sale on our next earnings call.

The value derived from both of these properties will exceed $200 million representing almost 10% rebate of the overall purchase price of Citadel back to our shareholders. These proceeds will be shielded by our current NOL balance and will be used to reduce debt.

Since the Citadel transaction, we've reduced our net debt by over $0.5 billion, and our stated goal of reducing net debt to below $2 billion remains a key focus. Although the revenue challenges over the last several quarters may extend the achievement of this goal into 2017. With that we'll open it up for questions.

Operator?.

[Operator Instructions] And your first question comes from the line of Andrew Gadlin from Odeon Capital Group. Your line is open..

Thank you.

Can you talk a little bit about digital advertising and some of the trends there?.

Yes, Andrew the -- well as you saw, digital advertising is moving nicely and we're gaining share in that realm, what we're seeing in the couple of different ways, principally it is selling the streamed impressions from our radio stations that we have on our apps and on iHeart.

And as we've indicated on the call, we'll moving those in addition to audio which will be creating a life feature for their app, and so we'll be, in essence distributing all of our content on audio as well sometime this summer and I believe we'll start to move over there as early as beginning of June..

And Andrew, I'll add to that. On the station side, which for the revenue predominately generated there is from the sale of our streams and websites and apps, we were up in the quarter 21%.

On the Westwood One side, revenue on the digital side is generated predominately from two things, one the sales of streams from inventory that we own or inventory that we rent.

Year-over-year, we terminated several contracts that we wrapped at a very low margin, because as we assessed the demand in the marketplace and the supply that we had on our owned and operated side, we realized that we could take advantage of a better margin profile on our owned and operated side.

So while revenue is down, we are generating more cash flow off of that same inventory.

And further to the Westwood One side, which is where we have our Rdio barter inventory, which is the inventory that -- promotional inventory that we run in exchange for our position in Rdio, equity position in Rdio, we ramped that down this year in first quarter as compared to last quarter to make way for a large push for the Rdio live launch, so you just see that space differently through the course of the year.

.

How does it look in Q2 and Q3?.

It would be a similar outcome to Q1. Rdio Live launches in June, so we will start to push that a little bit here over the coming weeks, but the other core trends stations up and the Westwood One trend will be an annual trend. .

And then you had a number of hires within the sales organization in the second half of last year.

Are you seeing traction yet on that, and if not, when do you forecast that traction?.

Well, most of those hires were made really in the fourth quarter and anywhere from November, December, January, February, so we are starting to see – as we mentioned, I think we hired as many as 30 people into the company during that period of time really over the last quarter over the last four five months.

And it takes a good 90 days for people to start to make a difference because of the way business is booked. But to answer your question, the early hires we’re starting to see some movements.

So the answer is yes, we are seeing positive impact from the number of really high quality hires that we have attracted to our company here in the last four, five months..

All right. Thank you..

Thank you..

Your next question comes from line of Lance Vitanza from CRT Capital Group. Your line is open..

Hi, thanks for taking the questions. I guess the -- a couple questions here.

The first is, can you talk a little bit about what kind of seasonal up-tick that you would typically expect to see as you kind of move throughout the year, and how you're feeling about EBITDA as you move forward?.

Well, Lance, obviously there is two components to it, revenue and expenses and we gave pretty strict guidance on where we are on the expense side of our business. And so we have got a very good handle there. Revenue, it is as I mentioned earlier in the call, we saw very anemic environment in March and April.

And so it makes you a little gun-shy to give – to try and forecast anything based on pacing when things can fall away. We’ve just seen pretty swings, positive and negative quite frankly on business in this environment. So we think that – and look we hear this from our peers, we hear this from people in other mediums as well, so broadcast and digital.

So it’s been a very choppy environment overall and for advertising and so it’s hard to say and I don’t want to forecast what’s going to happen. The rest of the year, we’ve got a very solid handle on our business and our expenses and we are working diligently to execute our sales plan.

So we’re controlling what we can control and as I said, with five quarters in a row now, we have taken some share against those 54 markets on the local side as well as digital. So we are very focused on it and I just can’t control where the macro is going to be here over the next few months. .

Now, I know you've paid down an awful lot of debt over the past few years, and obviously the asset sales are a big part of ongoing debt repayment.

Are there any other levers at your disposal that could give you on the balance sheet with respect to leverage and fixed charges, and so forth?.

Well, look we -- the asset sales are first and foremost and it’s a big number and Collin's done an excellent job shepherding both of these processes through to the states that they are at now and we feel that we are going to maximize value on both of these on behalf of our shareholders.

And as you know, we obviously sold our stake in the giants and used that repay debt as well and there is few small things here and there, some trust assets that we can let go and so and we will as it make sense.

So short of that, we’ve talked in the past about towers and no transaction that is really accretive to our efforts today, it just becomes a pretty expensive financing, so nothing that we are hyper-focused on at this time. But look, we are always looking for ways to find value.

As Collin said, look in essence, we have rebated 10% of the purchase price, or will, of the Citadel back to the shareholders through debt repayment by trying to in essence do portfolio management. So wherever we can find it, we are looking and always seeing what’s out there. .

All right. Well, thanks very much..

Thank you, Lance. .

Your next question comes from the line of Aaron Watts from Deutsche Bank. Your line is open. .

Okay, guys. Thanks. Just a few questions for me, Lew. I'm just trying to get my head around kind of the deceleration in pacings.

I know you touched on this, but can you give us a little more sense, is it certain markets that are just pulling you down, is it certain ad categories that weakened up? Do you feel like it's an overall market issue, which it seems like you're saying, or is it the Cumulus kind of specific changes that are going on that has moved that around over the last month or two?.

Well, I think that when you think about – it’s two buckets, it’s local and national. And on the local side, we have consistently outperformed the market. We did last year and we did in first quarter, but we really outperformed it in March and March was a very good month for us on the local side in terms of outperformance.

So it’s nothing that I believe is endemic to our portfolio of assets or our markets where we are seeing the national business was – we did get stung pretty good in first quarter, as I mentioned, we were down in our Miller Kaplan markets a little over 7% on that and the markets were down too.

I spoke to Mark Gray from Katz today about his outlook for the year and obviously he is over 99% of the national business. And what he said was, it was just the scatter market was – there was a lot of business that was non-returning in March and April in the scatter market and that was one of the reasons why the pacing well off so dramatically.

So there is always business that they expect to come in scatter and it just wasn’t there. And that’s retail, it’s telecom and it’s auto and home improvement and those are categories that generally book in period and they simply didn’t. And so it’s hard to say how much of this is really based on the overall economy right now.

I can tell you that obviously we touch a lot of clients with all of our radio stations we do business with, about a 130,000 clients a year and so we have 1,500 sellers that are out there in conversations and developing plans.

And so I think what we saw here in the fourth quarter and it’s build into first quarter, there was just a lot of nervousness and trepidation on the part of clients and this is nothing to do with the radio business, this is – these are the clients that we are talking to locally about overall – about the consumer and so as that starts to abate, I think we will be in a position to take advantage of it, but I just certainly can’t call when that’s going to be..

Sure, okay.

On the network side, with Westwood One, is it fair -- am I interpreting your comments correctly that in the second half of the year, or at least maybe later third quarter into fourth quarter, you think that business can stabilize and turn a corner, in contrast to kind of what you're seeing right now on the topline?.

I think that’s a fair statement. Anecdotally, we’ve seen some encouraging signs here in the last couple of weeks, so it’s three weeks in a row that we are seeing some improvement over prior in terms of rights. And so those are the kinds of early signs you need to see when a turn is starting.

So it’s very early, but I think that it’s safe to say we expect that to stabilize in the back half. And a lot of good work is being put into this. We are hiring some excellent people against it.

And so some of these things, integrations are tough and we just – some of these things, we just needed to work through, but we are getting that staffed appropriately, the assets are there and quite frankly the market is there in network, it’s healthy and so we just need to do a much better job of executing and competing and we are very focused on doing that.

.

Okay. Thank you for taking the questions..

Thanks. .

Your next question comes from the line Amy Yong from Macquarie. Your line is open..

Thanks. Lew, also just following up on the Westwood One question, how do we think about the potential for an acceleration in growth in the back half, and I think you mentioned in 2016 how you're much better positioned for the upfront.

Can you give us a sense on sort of the growth prospects as you look out into 2016? And then also, can you give us a sense of the cost cadence for the back half of the year? I know you gave a lot of color around 2Q, but how do we think about the back half? Thank you. .

Okay, Amy, thanks. I have -- I’ll let Collin handle these questions on how the costs are phased in the back half, because we did give pretty exclusive guidance on 2Q. And with respect to the networks, the upfront season really starts -- it’s really give or take about 50 contracts.

It’s not like a television upfront where there is -- and some people mistakenly think it is and it’s not similar to television upfront where it’s a dog and pony show and you put on a presentation and all of the buyers are there.

These are serious of negotiations on annual deals and they really start as early as late August and run through January and it just takes -- and it’s a very iterative process and it’s about 50 contracts, 50 of the largest advertisers that book time for the following year.

And as I mentioned earlier, it represents little more than half of the business with the rest coming in through scatter.

And so, it’s been a very important that we have -- that we have the right go-to market strategy in place that are -- that the 400 some-odd contracts that represent inventory from close to 10,000 radio stations is properly productized, properly organized in vehicles that makes sense to the advertisers and that we have as I say the right go-to market strategy to maximize our share and quite frankly compete much more effectively than we have in the last 18 months for that business.

And so -- and that’s really based on -- that’s based on having the right plan, having the right systems and having the right sellers to be able to execute and then the right back end to be able to, in essence, fulfill all of that. And so, we’ve been working really hard to pull all of that together.

And I’d say that we’re pretty far along on this and as I mentioned, Doug Johnston is in Chicago, who I was actually with yesterday and had -- the staff that he is building for there in Detroit very strong and obviously we have a very strong sports sales organization that’s based out of Chicago and New York and we had -- and this business is doing very nicely.

We had an excellent run in the Final Four.

Our business was up -- it’s a best year we’ve -- best performance that we’ve had yet as a sales organization in the Final Four and when Ron starts and we’re able to complete the staff in New York, it’s going to be busy summer but I think we’re going to be locked and loaded by the time we get to top fronts and we should start to see improvement in our scatter performance through the rest of the year and we look forward to 2016..

Amy, on the expense side, we said that in the second quarter, we’d be slightly up and for the full year, we would be flat to slightly down. So, 3Q and 4Q on the station side are going to be slightly down in each quarter. On the WestwoodOne side, we were down $8 million in Q1.

We said we’d be down $15 million in Q2 and about $40 million for the full year. Some of the benefit of our cost reductions we did see in the fourth quarter. So, the remainder of that, the variance between the $23 million in the first half and that $40 million faces a little bit more towards 3Q than it will towards 4Q..

Great, thank you..

Your next question comes from the line of Michael Kupinski from Noble Financial. Your line is open..

Thank you for taking the question.

I was wondering in terms of the collective radio -- collective ratings for the radio station group -- are they up in general? Are they down? Are they flat? Can you just kind of give us a sense of just the ratings trends for the Company in whole?.

Yeah, actually for the Company on the whole on a revenue-weighted basis, they’re flattish over the last four books. In relation to our markets, if you look at the total rating of the markets and our ratings share in comparison to those markets on a revenue-weighted basis, we’re actually up against those markets.

So, we said earlier in Lew’s script that we’re actually taking the best ratings in aggregate to market that we’ve had over the last eight quarters. So, we’re encouraged by that. It does take time to monetize.

Many of these agencies buy off a two or three book average and sometimes the same ratings won’t convert to the same revenue depending on how it’s been generated. So, with several new morning shows that we’ve got launched while they’re getting good ratings traction, it will take time before we’ll turn that into a really good power ratio.

So, we’re working hard on that, but from a ratings standpoint, we’ve not only seen stability, but also actually some positive turns..

And following up on that, in terms of -- in just the earlier question, too, about some of the markets – do you think that some of these format changes and things that you've done with NASH, do you think that these may have occurred in some of the larger markets that you might have that impacted the numbers or influenced the numbers a little bit more than in this quarter or as you head into the second quarter than others? Like, in other words, like your Dallas stations or some of your other stations, are they actually being more impacted by the format changes, in other words?.

Mike, there has been no format changes in Dallas. We’ve had -- when we bought Citadel, we had – we had the country station, we had K-Plex and which is the Wolf in Dallas and then we bought KSCS. So, we had that two country stations and those brands are still as we bought them.

We rebranded our stations in Nashville and I mentioned in the prepared remarks that we’ve taken stations -- our two country stations are one and two in Nashville and doing very well. Our New York country station that was two years old in the first quarter is performing nicely.

We’re showing year-over-year growth on revenue there and the ratings -- we went through a little dip late in the fall and it is -- and it’s starting to move back again. So, it is close to million listeners a week on that radio station and it’s a -- I think it’s the Number One station in the State of New Jersey in terms of total listeners.

So, we’re making good progress across the board. Remember, country is a mature format and it’s already the most listened to format across the board. So, where we had some 83 country radio stations in our platform, where it made sense, we would rebrand them NASH, the rest are powered by NASH and they air NASH content the same way.

NASH is more of the network television model and that they would air our content across the board and promote the NASH brand where it make sense to do so. So, it hasn’t really had a -- it hasn’t had a ratings impact, per se, on our business this year..

I guess I asked that question poorly, and I apologize for that.

I guess what I was looking for is -- where the format changes -- the NASH stations that you've reformatted to NASH, where they more attributed to the weakness that you had in your radio revenues versus your total company-wide revenues? I guess I'm just trying to get a sense of -- if and when we see these ratings improvements and things start to gain traction for your new format of NASH, can we then see better-than-expected upside? I'm just trying to get a sense of -- the weakness in revenues, are they more --?.

Yeah, I understand the question now. Yeah, now I understand. So, you’re going to see -- so, there is going to be pockets. So, you’ll see in Detroit when DRQ, which is the station we converted to NASH from a -- like a jack type or AC [ph] it was called Doug before.

So, as it starts to gain traction against YCD in that market and we’re starting to -- and we’re able to drive revenue on that station, yes, you’ll see. So, right now it has a negative comp on revenue.

We bought a station in San Francisco, KSJO, and it was doing ethnic block programming and we converted it to NASH, similar to what we did in New York and that station is -- it’s actually -- the ratings have come out of the gate very nicely and it’s essentially tied with the South Bay country station, KRTY that was in the market.

And so, that has not -- we have not yet started to monetize that. It takes a few books and we’re staffing against that. So -- and it’s part of our San Francisco cluster. So, that provides revenue upside. It’s not a negative comp, because there wasn’t anything there before but it’s really very low in terms of any billing contribution to our company.

So, that will be another one that will provide some contribution and some upside for us. And there is a handful more across the country as they -- as they’re converted to drive both NASH and NASH icon.

I think we got a real opportunity with both of those brands to drive -- where we’ve had -- particularly where we’ve had radio stations that are struggling to go ahead and change the format. And remember, as I mentioned, countries -- every market has three country radio stations practically except for the absolute very largest like New York and LA.

So, it’s difficult to take a classic rock station in a smaller market where there is already two or three country stations and go compete.

And so in those markets, that's where we have the Westwood One affiliation model, where we then work with our affiliates to provide incremental and compelling content like we just did with John Carisole [ph] in Orlando with his station there to put on -- to convert it to NASH and to out America's morning show on his station there.

So these things take time, it takes time for broadcasters to warm up to something, it takes time to build the track record and people are very deliberate about making changes with their asset and so it's not unusual and so as we continue to prove out the track record of NASH and create compelling reasons, including promotion and events and digital strategies and obviously the rest of our platform that come with that lifestyle brand, I believe that we are going to see more and more take by outside groups to become affiliates for NASH..

And Lew, you repositioned the company's portfolio in the past.

And are there additional opportunities to possibly monetize additional smaller markets, or are you happy with the markets you currently have, or do you think that there's opportunities to rationalize some of your other station portfolio?.

Well, Mike, we have said in the past we are very happy with our platform as it stands today and the business model is coming together nicely to leverage both content and distribution locally and nationally, build the platform to three separate buckets that we're focused on, our station group, our network and on NASH.

And so if we don't do anything else, we feel the integration is progressing very nicely and we're building a very nice business model that should start to show some operational leverage.

That being said, we're always looking for ways to manage our portfolio in such a way that it can create value and so we're always open to ideas and we're always looking for different things to do.

There are a lot of moving pieces in it, so there are always some things to do, but I would say nothing major, this is really, it's a lot of just sort of trimming at this stage of the game..

Perfect, thank you..

Your next question comes from the line of David Bank from RBC Capital Markets. Your line is open..

Okay. Thanks. Hey Lew, you've done a great job I think in giving us transparency in your market performance, and your performance versus the Miller Kaplans.

I wonder if you could give us some kind of broader perspective, maybe on the Miller Kaplans versus the ad market as a whole, in that -- do you have a sense -- and it'd probably be tough to know for first quarter, but maybe for fourth quarter of '14 or the second half of '014, how radio's share was sort of generally doing in your markets versus the total ad pie? Do you feel like radio was gaining share, kind of maintaining its share, was it losing share? Do you have kind of any sense of that, and how recent? Thanks..

I don't have single source data on, as late as the fourth quarter. I think there has been, to be able to give you an accurate indication on what everybody is doing, there are several firms that publish information on media share.

Unfortunately nobody is pulling from, there is no single source data, and so there is just a lot of estimates that are going on out there.

I think what we've seen overall is that radio, at the ad markets, are growing in essence, advertising is very closely correlated with consumer spend and it's very low single digit in terms of growth and we've seen that, wages aren't really growing with inflation and you've also seen savings rate go up.

And so as a result, consumer spend has been challenged and that obviously impacts ad spend and then clearly you see digital growing faster than virtually every other category of advertising.

So with that being said, what we've seen is that radio in essence has held its own, it's stayed relatively flat and these are all estimates, whether it's $16.5 billion or $16.75 billion or 17 billion, I don't know that anybody knows for sure because they are not pulling 10,000 radio stations and getting audited financial statements.

But it's somewhere in that range and what we are seeing across the board is that the ad markets are becoming more fluid, that you've got a lot more choices than ever before and a lot of must buys are mediums other than radio, I think are now all being looked at differently and so I think that you're seeing a lot of flux and some of that can be to our benefit and I think it's going to be an interesting next couple of years as a result of it.

So I think a lot of long held tenets or beliefs in terms of how share gets distributed are being questioned and challenged and value propositions are being re-evaluated.

And so radio as an out of form medium, still reaching over nine and 10 people and really has principally the de facto leader in car and the de facto daytime medium when all commerce occurs, really has a very strong value proposition and so as we -- and that's one of the reasons that Pierre e joined us and we're fortunate to bring him on our team and we are going to be very aggressive in getting out there and telling our story and our value proposition because I think we've been -- we haven't really seized the narrative properly and we've been repositioned by competition that speaks with a single voice.

And so we've got a heck of a story to tell.

We've just got to do a much better job of getting out there, because it truly is a strong value proposition, a targeted mass medium and that is highly competitive and when we think about the value of a talent endorsement and we think about the value of -- and then the whole value proposition of social media, which is a recommendation engine, you think about a talent endorsement, and really how powerful they are to get consumers or listeners to go someplace, do something, buy something, it's pretty compelling and the ROI is extraordinarily high.

And so those are areas where I think we can do a much better job as an industry, tell our story and price our product properly. So we're going to be competitive and I think that you're going to see a lot of flux in the ad world and how the media marketing mix is distributed here over the next few years.

I think it's going to be very interesting, very competitive and a great challenge and an opportunity for us..

Okay, thank you very much..

Your last question comes from the line of David Phipps from Citi. Your line is open..

Hi. Thank you for taking my questions.

Can you talk a little bit about the digital advertising pacings and how we should think about that as we go through the year?.

Sure, David. So on the station side, we still see pacings consistent with what we did in the first quarter, we were up 21% on the Westwood One side for their two things at play there. One, we reduced the number of third-party rep deals that we had because we could generate higher margin on our owned and operated inventory.

So well, we will see revenue declines there as a result of that, it will actually have a better margin profile for us. And the other thing that runs through that line item is the barter inventory that we run in exchange for our equity accrual into Rdio.

That will ramp up starting in kind of May, June timeframe and really into the third and fourth quarter pretty meaningfully and it did the same last year, but probably even more meaningfully this year as a result of really blowing it out for the promotion of Rdio Live and our stations on that platform. So that's the trend we'll see..

And finally, so you completed some of the hires -- that'll be completed in the second quarter.

So is the second quarter where we look to see some of the unusual cost items start to drop out again?.

Really and even in first quarter, there weren't any unusual cost items that we saw, I mean everything was pretty straightforward. So going forward, we'll see the cost expectations in line with what we guided on this call..

I'm asking differently.

So are there any bonuses to sign people, or when you signed some of the new managers that you've brought on, those costs are kind of normalized within the SG&A or the content, or the direct operating costs?.

Yeah. Those costs are normalized in the direct operating costs. The good thing that we've been able to do is we've focused on optimizing the businesses. All of these hires we've made and brought in, we've done it in an expense neutral way. So there isn't anything funky going on there or any timing issues..

Okay. Great. Those are all my questions. Thank you..

Thank you. Alright. We appreciate that very much. And operator, we will turn the call back and we look forward to talking to everybody in 90 days. Thank you very much..

This concludes today's conference call. You may now disconnect..