Ladies and gentlemen, thank you for standing by, and welcome to the Cumulus Quarterly -- Media Quarterly Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session.

[Operator Instructions] I would now like to hand the conference over to your speaker for today, Collin Jones, Senior Vice President, Corporate Development and Strategy. Sir, you may begin..

Thank you, operator. Welcome everyone to our Fourth Quarter and Full Year 2020 Earnings Conference Call. I'm joined today by our President and CEO, Mary Berner; and our CFO, Frank Lopez-Balboa.

Before we start, please note that certain statements in today's press release and discussed on this call may constitute forward-looking statements under federal securities laws. Actual results may differ materially from the results expressed or implied in forward-looking statements.

These statements are based on management's current assessments and assumptions, and they are subject to a number of risks and uncertainties. In addition, we will also use certain non-GAAP financial measures.

We believe the supplementary information is useful to investors, although it should not be considered superior to the measures presented in accordance with GAAP. A full description of these risks, as well as financial reconciliations to non-GAAP terms are in our press release and SEC filings.

The press release can be found in the Investor Relations portion of our website, and our Form 10-K was also filed with the SEC shortly before this call. A recording of today's call will be available for about a month, and details for how to access that replay can also be found on our website.

With that, I'll now turn it over to our President and CEO, Mary Berner.

Mary?.

Thanks, Collin, and good morning, everyone. Last year at this time, we were very optimistic about the year in front of us.

We'd entered 2020 with strong momentum, the strategies that we've been executing since mid-2018 were paying off as evidenced by the fact that on a same-station basis, we grew revenue in 2019 for the second straight year and EBITDA for the third straight year excluding political.

And we maintained strong performance through the first two months of 2020 with growth continuing on both the top line and bottom line. Of course then COVID hit, which derailed our 2020 plans.

Job one became mitigating the pandemics impact, so we swiftly pivoted our focus to maximizing revenue share, materially reducing expenses, protecting and bolstering cash, and strengthening our balance sheet. I'm extremely proud of and grateful for our employees' unwavering efforts.

I'm pleased with our success in all these areas specifically on a same-station basis. We posted another quarter of sequential revenue improvement with Q4 16 points better than Q3 and down 13% year-over-year. We delivered a year-over-year digital revenue growth of 12% led by podcasting growth of nearly 40%.

We executed $90 million of cost takeouts including permanent expense reductions, that will result in a $45 million annualized run rate benefit.

We completed two significant non-core asset divestitures that do not impact our ongoing operations, generating $282 million of gross proceeds, and we generated $33 million of cash from operations and finished the year with $272 million of cash on the balance sheet.

Collectively, we think these actions and outcomes have not only positioned us to perform well in a recovering economy, but have also given us the flexibility to respond to opportunities that deliver shareholder value.

While we continued to be impacted by the holiday COVID spike and uncertainty about when the pandemic will end, we do see some encouraging signs that are worth noting.

From a revenue perspective, many of our advertising categories are improving, so far in Q1, top performers include government, financial services, beverages and food products and utilities. Sports betting is a nice new growth driver.

For today, we currently have almost as much revenue committed in this category as we did for the entire year in 2020 as deregulatory momentum is driving more and more states to legalize online betting[ph].

We believe we are well positioned to capture a healthy share of that category's growing audio spend as we move forward given our strong assets in states where sports betting is currently legal or on the road to legalization. Not to mention our massive promotional heft and marquee talent in the national sports space at Westwood One.

Digital, which I mentioned -- as I mentioned grew for the full year 2020 has been and continues to be our best performing revenue channel. This is driven by terrific growth in our podcast business which is pacing up more than 30% in Q1, drafting on a strong momentum coming out of the fourth quarter.

We had three podcast Dan Bongino, Ben Shapiro, and Mark Levin ranking in the top 10 of the news category in Q4 and in the top 10 among all podcasts on Apple in January. For the full year 2020, we passed a noteworthy milestone, achieving more than one billion downloads for the year, an increase of 40% from 2019.

We also continued to add podcast to our stable including the launch of partnerships with Rolling Stone, veteran sports journalist, Rich Eisen, and Olympic gold medal-winning wrestler Kurt Angle, whose podcast debuted number two in sports on Apple with this early February launch.

Looking ahead, we expect more of the same for this business, steady and profitable growth. It's also worth noting that many components of what makes radio such an attractive advertising medium remains strong.

For example, radio still accounts for approximately three quarters of ad supported audio consumption, roughly consistent with pre-pandemic time periods. And if we just look at ad supported listenership in the car, radio share remains virtually unchanged at nearly 90%. We're also seeing nice growth in streaming.

Streaming listenership for the industry now accounts for about 13% of total AM, FM listening and the Cumulus streaming platform itself is up more than 10% year-over-year in the fourth quarter in total listening hours with smart speakers now accounting for more than a quarter of our streaming listenership.

However, we are not out of the pandemic woods yet, so we will continue to focus on the cost reduction efforts that have proven so valuable to us over the past few years. As I mentioned previously, we took out $90 million in costs in 2020 which was a critical factor in our ability to successfully navigate the pandemic last year.

Additionally, the permanent pulp portion of these costs -- of those cost has improved our operating leverage. And to further expand that leverage and protect against any further economic impacts of the pandemic, we are also working to identify new opportunities to generate additional permanent savings.

As importantly, we are continuing to look for ways to strengthen our balance sheet. If 2020 proved anything to us, it's that our sustained attention to deleveraging and derisking the balance sheet over the past couple of years proved to be a crucial defense against the previously unimaginable challenge of a global pandemic.

With regard to Q1 our pacing is currently down about 20%, however, given the business was significantly impacted in March of last year, we expect that Q1 final result will be better than current pacing indicates. And with that, I'll hand the call to Frank, who will give you more detail on the quarter and the -- quarter of the year and the outlook.

Frank?.

Thank you, Mary. First, I'll start with the quarter and then move to the year's financial highlights. As usual, I'll speak on a same-station basis. In Q4, total revenue was $246 million down 13.1% [ph] from Q4 2019. This decline was less than half of what we saw in Q3.

Ex-political, we were down 17.3% which also represented a nice sequential improvement from the prior quarter. As expected, political set a record for us this quarter driven by strength in both the national election as well as the Georgia run offs where we had five markets that received political orders from those Senate races.

For comparison, political was $14.3 million this quarter versus $3 million in Q4, 2019 and $11.3 million in Q4, 2018. As Mary mentioned another key driver for us was digital, which was up 11.3% for the quarter led by podcast in which continues its profitable growth trajectory.

Expenses declined in the quarter by $25 million or 11%, driven by both reductions in variable costs related to revenue declines and active fixed cost reductions. EBITDA for the quarter was $39.7 million down 23% from Q4, 2019, a much better result than in prior quarters in 2020 on a nominal basis and in terms of year-over-year change.

Moving to the full year; total revenue was $815 million down 25% in 2019. Total political for the year was $26.3 million. So we'll be comping against a strong performance in 2021. Expenses for the full year declined $143 million or 16% versus 2019.

More than $90 million of this expense decline was a result of active fixed and semi-variable cost reductions. You'll note that number has increased from the $85 million we talked about on our last earnings call.

Nearly $30 million of the $90 million in cost reductions relate to permanent actions, while the rest were temporary, though the level at which those temporary expenses return will depend on revenue recovery in 2021.

With $30 million of permanent cost actions have an approximately $45 million annualized run rate again higher than the $36 million we communicated on the last call giving us an additional $15 million or so of expense reduction that we will pick up in 2021. In total, EBITDA for the year finished just a bit above $82 million.

And with the benefit of cost reductions and aggressive working capital management, we generated $33 million of cash from operations during the year. Additionally, we cut our original 2020 budgeted CapEx spend of $30 million potential [ph] to less than half of that finishing the year with $14.9 million of CapEx.

We did pay out $5.8 million of cash taxes throughout the year. Our normal course operations would have generated a sizable net operating loss for tax purposes, but that NOL was more than offset by the tax gain on our Tower sale-leaseback transaction.

The Tower transaction in DC land sale both of which closed during a very challenging backdrop of the summer ride in $282 million of gross proceeds, the sum total of all these cash flows generated a year-end cash balance of $272 million and a net debt reduction for the full year of nearly $300 million, results that we are really proud of.

In regard to our cash balance, about $133 million reflects net proceeds from asset sales, that if not reinvested are required to pay down debt. But half of that pay down would go only with the term loan in June and the other half would be split between the term loan and bond in the September-October timeframe.

Another $16 million [ph] of the cash balance reflects our ABL revolver draw. As mentioned on previous calls, we do still intend to monetize a sizable piece of property that we have in Nashville.

Well, that property won't fetch the amount we generated from the DC land sale in a very attractive location and we anticipate the sale process will be competitive.

Touching on a couple of other items that relate to 2021, with regard to free cash flow, we do expect that our CapEx spend this year will revert to our historical level around $30 million to catch up in some of the deferred items from 2020.

And to update you on the NCAA, well we and the NCAA continue to pursue our 2020 contract dispute in court, we agreed to carry the NCAA tournament in 2021. With that, we can open the line for questions. Moderator, we're ready for our first call..

[Operator Instructions] Our first question comes from the line of John Janedis with Wolfe Research. Your line is open..

Thanks, good morning. I had two, one on sports betting, and then one on cost. But on sports betting, you talked about that to start the year, Mary.

As you look at the size of the category today, how much runway do you have as more states legalize betting? Is that going to be a top five category over time, and has the growth of the category changed, how you think about the value of sports rights programming and radio? And then separately, just quickly on cost, given the early budgets for the year and your comments, are you looking at more permanent fixed cost reductions or, are you think[ph] we're in a good place?.

Thanks for the question. Good morning. With regard to the category is still -- it's still remains to be seen. There are the handful of states that are legal at this point, not even half the states. And we have a terrific footprint and many of those Pennsylvania, Tennessee, Michigan. And as I said, we think there is upside.

As it relates to how big, I think it does have the potential at some point to be a pretty big channel, a pretty big category, if you will for radio, but there is complexity in navigating the legal and regulatory framework. But we do have momentum.

And again, I think we have strong properties both locally, both with our station footprint, but also with our network vehicles. So we're focused on that. As it relates to how it makes us think about our sports content and positioning, there is lots of synergies there. And so it's encouraging, that's one bright spot in the category picture.

I think you asked about -- I think the second question is about cost reductions, as we said in the prepared remarks, we are continuing to be focused on that, we've always said we don't operate with a lot of fat, but dealing with the new normal of mostly remote work has shown us over the last year, new ways of performing some of our operations that are more efficient than the status quo.

So the short answer is yes. We're focused on three buckets, the obvious is T&E and the second would be real estate, how we work, where we work and then the third is business process improvement and efficiencies enabled by technology. And so those are the areas we're focusing on..

All right. Thank you very much..

Thank you. Our next question comes from the line of Michael Kupinski with NOBLE Capital Markets, your line is open..

Thank you. I have a couple of questions here. You indicated that you plan to take out additional costs.

And just following up on John's question, can you give us a sense of where those costs are being cut at this point?.

Hi, Michael, it's Frank. Mary talked about some of the areas in her answer and what we're focusing. I'll first start by saying that this is a continual process for us. In our third quarter earnings call, we went through a very specific cost exercise.

In the middle of the summary[ph] she indicated that our run rate expense for cost cuts for 2021 was going to be $36 million and we increased that by almost a third to $46 million, and that was through the normal process of budgeting for the year. As we go through 2021, it's a continual process.

Remote from -- workforce gives us opportunities, real estate gives us opportunity, but there are a lot of things that are behind the scene in terms of business process improvements that will make a difference.

So at this point we're not going to highlight numbers, will update throughout the year, but rest assured, this is part of our ethos in terms of running our business to try to be as lean as possible without affecting our revenue and our growth..

Okay. And in terms of political last year, what -- I know that a lot of got -- a lot of Radio Station cap [ph] Bloomberg money and so forth.

Can you give us a sense of what political was on a pro forma basis for Q1 last year?.

Last year Q1 was a little bit over $4 million..

Okay. And then, in terms of the -- you indicated that pacing so far is down 20%.

Can you give us a sense of what that is versus network, local, national?.

We won't give you the specifics and breakdown, but I would say that the network is -- the network and national are doing better than local at this point. And that's a pattern that we saw towards the second half of last year..

In terms of just the general economies of your markets. I mean -- can you -- this a sense of what -- are there specific areas of the country that is performing better than others.

I mean you kind of give us a sense of the geography of what's happening?.

It's interesting. Last year we saw a fairly consistent but narrowing gap between our PPM markets and our diary markets, as we're going into the first quarter that gap has narrowed, which is nice.

I think part of that could be the fact that our PPM markets are not -- and exclusively but not generate and they're not in the states where you're seeing the biggest impact of shutdowns like New York or California, but that's a trend that we're seeing, and we're pleased with that at this point..

Got you. And I know that advertising appears to be booking later and later. Is there any indication at this point, people booking into the second quarter at this time.

Do you have any thoughts on how that's shaping up?.

No, no, it's -- listen [ph] I mean obviously we did get some monies from the upfront for our network, which we always get. But in terms of flows at this point to make any representation in the second quarter, it should, way too early and as Mary talked about, Mark it's going to be interesting because we had a very robust first two months of the year.

And then as we move to the second half of March things just stopped and so we're expecting a more normal environment, which is one of the reasons why Mary indicated we expect our results for the first quarter to be better than our pacing indicated at this point..

Got you.

And then just on the sports betting, on the relative size of the sports betting category for you last year, would it -- where would it rank like-- would it rank in the top 25 at this point or is it just really very small at this point?.

It was -- it's an emerging space for us and it certainly was not in the top 10..

Okay. All right, thank you. That's all I have. Thanks..

Thank you. Our next question comes from the line of Zack Silver with B. Riley. Your line is open..

Yes, thank you. Thanks for taking the question.

The first one is just around some of the categories that were more heavily impacted by COVID-19 last year, travel, entertainment, hospitality, what percentage of revenue was that for you guys in 2019? And what are your expectations for that to recover this year?.

Look, we don't give a breakdown in terms of what each of our individual categories are, not surprising when we looked in the first quarter some of the categories most impacted, which are large categories for us are still under pressure and that includes entertainment, restaurants and automotive, but having said that, they are all pacing below the trend that we talked about for the entire Company.

So that's offset by some of the stronger -- relatively stronger areas that brings us to a total pacing at this point down to 20%.

For the entire year, it's hard to tell where the entire year is going to be, a lot of it depends on the success in the vaccines stimulus, the environment of the small business and our transition out of what has been a very difficult period of time for the country, our business and our employees..

Got it.

And then just around podcasting, I don't know if you can give us a sense of how big -- you mentioned us in the prepared remarks, but how big that is in terms of the overall digital bucket and we've seen a lot of podcasting assets exchange hands for multiples that are well in excess of where the market values you guys? And I don't know if there is any plans you have to kind of maybe disclose more metrics around podcasting or other mechanisms you have your disposal to maybe get some more credit from those assets that you own?.

So our podcasting as you know, as reported in our digital segment for reporting purposes, and historically we've said that there is three lines of businesses which are streaming, C-Suite and podcasting roughly a third, a third, a third.

And not surprisingly, with the strong growth in broadcast -- podcasting that is now the largest component of our digital line for achieving [ph] 40% and may get larger than that depending on the growth.

With regard to the strategy and podcasting as you know, and we've been consistent, Mary has talked about in the past, the business that we've grown organically and profitably, we are in the flows of transactions that occur in the market and we see virtually all assets, whether it's podcasting or other.

And at this point, we're focused on our organic growth, doesn't mean we won't look at smart acquisitions but we've generally at this point made our bet [ph] on partnership arrangements with our talent as opposed to going out and spending a lot of money on IT or infrastructure. And so that's our strategy now, and that's our key focus..

That makes sense. Thank you very much..

Thank you. Our next question comes from the line of Allen Kato with Beach Point Capital. Your line is open..

All right, thanks for taking my question. Just two quick ones. One, I didn't catch the details on the pending use of proceeds. So I think you said term loan was going to be paid down in the spring. And then there would be a split between the bonds and the term loan in the fall.

Did I catch that correctly?.

Yes, let me repeat that. So we do have the reinvestment bucket of $133 million. Allen, we remind you that reinvestment back is pretty broad. We can use that for CapEx and turn with[Phonetics] investment acquisitions. So, absent any reinvestment by virtue and this was negotiated in the term loan when we put that in place.

The DC land proceeds go directly to the term loan pay down, which is why I've mentioned roughly half of the $133 million goes to that if we don't use as reinvestment.

But it -- and then the other balance is done -- is spent ratably between the term loan and the bonds and that will be at the end of the third quarter and the first -- beginning of the fourth quarter, which it was a timing, which we closed -- the first closing of the sale-leaseback transaction..

Got it, got it. And then second question on the disclosure around political revenue and political EBITDA, when I look at it seems like in the fourth quarter, looks like a $14 million revenue contributor but then close to a $13 million EBITDA contributor.

So what's the cause between -- for the margin being so high there?.

It's just a high -- it's a high margin revenue product and that's what you see for the entire industry. And so are our cost is basically just a cost-of-sale and obviously marginal cost to put it on the year.

So it's very high margin for us, but frankly, when you look at our book[ph] the unit economics of our local radio, that's very high margin as well. It just came out of a very lumpy, lumpy in a very identifiable way..

Got it, okay. That makes sense. So I had. Thank you..

Thank you. Ladies and gentleman, that's all the questions we have for the day. I will now turn the call back over to management for closing remarks..

All right, thanks everyone for joining today. We look forward to speaking with you again soon. Have a great day..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..