Good morning. Thank you for attending the Cumulus Media Quarterly Earnings Conference Call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. I would now like to pass the conference over to Collin Jones, Senior Vice President of Corporate Development and Strategy.

Sir, you may proceed..

Thank you, operator. Welcome everyone to our second quarter 2021 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 this 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-Q was also filed with the SEC shortly before this call. A recording of today's call will be available for about a month. Details for how to access that replay can also be found on our website.

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

first, we expect to benefit in the near-term from the industry recovery in the high margin traditional radio business, given our strong competitive positioning, enhance operating leverage, and massive scale.

Second, our digital channels are achieving strong growth with a lot of continued room to run, they will continually and collectively deliver well over $100 million of revenue in 2021, with a nice upward trajectory expected from there. Third, we will continue to actively pursue ways to further reduce permanent costs.

As I mentioned earlier, we now anticipate the 2022 fixed costs will be more than $70 million below 2019, an increase of 40% from our last fixed cost guidance of $50 million reduction from that baseline.

Fourth, given our liquidity and leverage profile, we are well positioned to execute accretive transactions, either for continued portfolio optimization in the radio space, or for the opportunistic acquisitions of companies that can accelerate our digital strategies.

And lastly, as EBITDA increases, the company’s – free cash flow generation will allow us to more rapidly delever, providing even greater flexibility in our capital allocation decisions, including the potential to return capital to shareholders. And with that, I’ll turn it over to Frank.

Frank?.

Thank you, Mary. It's good to speak with all of you again after a quarter. We not only made nice progress with our financial performance, but also had a number of exciting announcements to share with the market. I'll start by walking through this quarter's numbers in more detail.

On revenue, we finished the quarter much better than the plus 35% pacing we indicated on our last call with total revenue of approximately $225 million, up 54% from Q2, 2020. This increase represented continued sequential improvement, as we continued and executed well in the context of the recovering market.

For comparison, Q1 finished down 25% versus Q1, 2019. Q2 finished down 20% versus Q2, 2019 and as Mary mentioned, we're currently pacing down in the high teens versus Q3, 2019. But anticipate that pacing will improve as a quarter progresses.

Well that performance generally reflects advertising rebounds across our business lines, we were nonetheless still negatively impacted in certain categories like auto, retail restaurants and entertainment, which continue to suffer from knock on effects of the pandemic, including the well-publicized chip supply issues and labor shortages.

Digital once again led the way in the quarter with aggregate revenue growth of 55%. On the expense side, total expenses increased in the quarter by $35.5 million year-over-year.

However, more than 100% of that increase was driven by return of costs related to actions that we took in response to COVID-19 last year, including furloughs, salary and benefit reductions, which were designed to be temporary, as well as the return to variable costs and higher revenue.

These increases were partially offset by more than $10 million of realized fixed costs reductions year-over-year. And as Mary said earlier, we now have visibility to more than $70 million of fixed cost reductions, which we expect to see in 2022 when you compare to the 2019 baseline.

The combined revenue and expense performance resulted in EBITDA for the quarter of approximately $37 million. Before turning to our Q3 cash flow performance, I wanted to touch a bit more on the WynnBET announcement from last week. As Mary noted, the broad-based WynnBET partnership is an exciting deal for the company.

A minority portion of our consideration for delivering advertising will be paid in equity over the course of a partnership, giving us another avenue to participate in success of their platform.

From a phasing standpoint, the peak period for driving new sports betting subscribers is the NFL season, making us their perfect audio partner given our exclusive rights to NFL primetime.

Additionally, the NFL recently announced that in game sports betting advertising will be allowed for the first time ever, which itself will provide exciting new opportunities for us to deepen our relationships with sports betting companies.

Lastly, what we're looking for to using our platform to help drive WynnBET growth, we have preserved our ability to do business more broadly in the space. As you may remember, we were in litigation with the NCAA over a contract dispute related to the 2020 season.

Well, that litigation was ongoing, we agreed with the NCAA that we would carry the tournament in 2021. We're pleased that on August 1, we settle the dispute. And in addition, we entered into a multiyear go forward partnership that keeps Westwood One as the home of both the digital and broadcast audio rights for the NCAA.

We look forward to a bright future for this relationship. Now moving to cash for the quarter, cash from operations in Q2 was using approximately $5 million, driven mostly by higher receivables on higher revenue. And CapEx was $9 million an increase from last quarter that reflects some catch up and projects in 2020.

As we mentioned last quarter, we still expect CapEx to be around $30 million per year, consistent with historical levels. Early on in the quarter, we received $18.3 million of PPP loans in addition to the $1.79 that we received in the first quarter.

We also completed $175 million of debt paid on this quarter, primarily on our senior secured term loan, and we finished with approximately $125 million of cash on the balance sheet, and nearly $96 million of additional available liquidity when considering our undrawn ABL revolver.

With all the puts and takes, and excluding the $175 million debt paydown, cash increase in the quarter by $6 million. As of June 30, our net debt was $701 million, reflecting a reduction of $308 million from 12/31/2019. And we continue to take actions to lower net debt further.

As Mary mentioned, we announced this morning that we completed the sale of our national real estate worth $34 million in gross proceeds, subject to a 12-month reinvestment rate, the net proceeds from the sale are required to paydown debt.

And finally, echo on Mary based on what we see now, we anticipate EBITDA in the range of $175 million to $200 million in 2022. We will update this view as the year progresses. With that, we can open the line for questions. Moderator, we're ready for our first question..

[Operator Instructions] Our first question comes from the line of Dan Day with B. Riley Securities. Please proceed..

Yes. Hi, thanks for taking my questions. Good morning, everybody. So you guys have done a great job with the balance sheet over the last year or two, obviously, through a really challenging time. And assuming the recovery takes hold and everything goes well.

Can you just talk about kind of the tradeoff here between as far as returning capital to shareholders between buybacks and dividends, how you think about fair value for your share price.

What a sustainable dividend policy might look like, and then sort of the return profile you need to see from any sort of acquisition or significant investment into content that you could compare that again?.

Good morning, Dan. This is Frank. I'll take that question. There is a lot to unpack there. Yes, a lot of questions. So first, we've been very focused on getting back to historical type of EBITDA levels to generate the free cash flow that I know the company can generate. And that provides a lot of optionality for us.

The way we think about our allocation of cash, it's a multi-pronged approach, we will always look at ways to enhance long-term shareholder value. We find investments whether they're internal investments or external investments to generate growth and profitability.

And having said that, over the past several years, we've been more in the pruning the portfolios as opposed to adding that we're not against adding acquisitions, and that's clearly something that we will consider.

With regard to returning cash to shareholders, as we de-lever, we're particularly going into 2022, I expect we'll be able to talk about where we are against our leverage targets, and what the implication will be on the balance of returning cash to shareholders from sub acquisitions.

But if you look at our EBITDA guidance, if you look at a rapid deleveraging, and if you go through the models, you'll see that in 2022 we’ll have a lot of optionality across many different fronts..

Awesome. Thanks, Frank.

Any specific areas as far as investment that you've been looking into, I think you mentioned on the digital side, just between podcasting anything you can point to?.

Nothing, specifically that we can talk about right now. But categories that the highest priorities as Mary mentioned, and as you also mentioned, our digital assets, digital local marketing services, podcasting, et cetera. But if there are radio opportunities out there, that makes sense, we'll consider that as well..

And then one more, and then I'll turn it over, just one thing I've been thinking about sort of with interest is, the growth of programmatic channels for the digital side like compared to like mobile or digital display, programmatics, they're really small portion of kind of the advertiser buys.

A lot of investments been kind of pumped into that space over the last year, so not necessarily, from you, but from your peers.

Are you kind of starting to see the fruits of that, or more advertisers come into the digital audio ecosystem with these new technologies, maybe as or more targeted, having started to kind of seen that, and was that driving the strong 2Q for the digital side?.

I'll take that one. I would say it's really early days on that. And generally, the growth is coming from our own sales organizations as opposed to programmatic marketplaces. But there is some opportunity for sure, we're keeping an eye on it and participating in small ways..

Awesome, thanks, guys. Appreciate you taking my questions, and I'll turn it over..

Thank you, Mr. Day. Our next question comes from the line of Michael Kupinski with Noble Capital Markets. Please proceed..

Thank you, and congratulations on a solid quarter. A couple of questions regarding the WynnBET, I was wondering if you give us a little bit more flavor on the scope, and maybe the size of that opportunity.

In particular, if you can give us some sense of what the network business in which I did indicated that, the NFL games and so forth, and sports games are likely to be the focus around the network business. So I was wondering if you can give us a little sense about what that might mean for the upcoming third and fourth quarter.

And if maybe can just kind of help us size, you had indicated that WynnBET is - going to be one of your largest advertisers, and I would assume that's probably going to ramp up over the next several years.

And then finally on WynnBET, you mentioned your minority stake in the company, if you can kind of give us a sense of what your stake will be, and how meaningful that might be in terms of the prospect of creating shareholder value?.

Good morning, Michael. It's Frank. I'll take that. So we can't really go into specifics on the WynnBET partnership but I'll give you some color they're trying to help you get to the answer the question. So, we talked about in the past that the sports betting category can be a top 10 category for us.

And we expect it will be particularly as more states legalize and the online betting companies spend a lot of money. At a one bad transaction moves us closer to be able to say the top 10 category, but we're not there yet. But it's a meaningful transaction in relation for us. Second, with regard to the size, we really don't disclose our customer sizes.

But as not only one of our larger customers now, but the ramp up, they will be a meaningful customer for us. But again, we're very diversified company in terms of our customer base. So we're pleased with the transaction.

Next, a lot of the transaction when that given the partnership nature not only at the network level, but with our local radio station, a large component that is truly incremental revenues to the company by virtue of the transaction.

It does displace in certain areas of their inventory we could have sold, but given the structure of the transaction, we're viewing a lot of the transactions incremental revenues the company in particularly when you consider the equity component of it. Lastly on the equity.

We're not going to disclose at this point the percentage of the company that we will have with the company, it's a small percentage, if you look at the size of their company.

Over time, as we recognize revenues, and once the company is a public company, you may know that they've agreed to do a merger its back merger so it will be a public company, later this year, early next year.

The way the kind of work is once we have the equity and the shares on balance sheet, we'll have to mark-to-market that equity as a public company, and at that point, you get a better sense as to the size of it.

But ultimately, we are in this to be - shared success with them, and as they succeed, the underlying equity is going to be another component of value, which it’s just been created by this partnership and hopefully, that will grow over time and you'll see that on our balance sheet..

Thank you.

And are you now in discussions with other sports betting companies or is this - if this just kind of like open the door I think so what are the opportunities to further expand in that category?.

There is enormous opportunity for us. I mean, this transaction, and this partnership is a significant transaction. But before WynnBET we have add and continue to have strong relationships with other operators in the industry, and we do have a lot of opportunities, and inventory and we're in active discussions.

And as Mary - well as I mentioned in my prepared remarks, the new NFL policy of allowing, in games, sports betting, advertising is a big deal. And that's going to be truly incremental on premium pricing and we expect to see from the entire industry - not only from WynnBET hopefully, but from others as well..

And just a final question, can you give us a sense of what happened to, you know, spot rates last year during the pandemic and where the company is on rates relative maybe to 2019?.

Right, so that last year, well I can't wait to stop talking about last year. But last year, we had both a price and a demand issue. And you can see that from the second quarter last year, revenues were down almost 47%, revenues were under $56 million and we're proud that we rebounded almost 55% from that.

And so that was a combination of both price and demand. Now, as we're looking at this year in rebounds, there are certain markets that we've been able to take price up. And those markets which have generally been sold out and close to sell out. So we are having some pricing leverage in some markets.

But having said that, some of the categories are still pretty negatively impacted, as we talked about whether its autos, restaurants, et cetera. So in those markets where we're not sold out, the focus is to try to get more volume and pricing hasn't really recovered.

Having said all that, there are categories that we saw in the second quarter, which are at/or exceeded 2019 levels, which we're pleased with that includes categories like home products, food products, and then the general services and financial are pretty close 2019 levels so, those categories helped us in the quarter.

But still offset by some of the bigger categories which are still slower to come back. And over time we hope to be able to exercise more pricing leverage as the demand comes back..

Thank you, Mr. Kupinski. Our next question will come from the line of Bill Goldman with Cetus Capital. Please proceed..

Yes, congrats on a great quarter and on the Nashville sale.

On the WynnBET I'm just curious you said that they're spinning it off into a SPAC is Wynn Resorts going to still have a equity stake in the company as well?.

Yes, well you should look at their website it's pretty clear. But yes, Wynn Resorts will have majority ownership of the combined entity. I’d asked you to go look at their website and it’s pretty well detailed in there..

Then secondly in the quarter, you guys announced a type of partnership with Uber.

Can you guys give a some of the details around that?.

Yes sure. It's an exclusive partnership to represent the Uber cartop outdoor advertising in the markets in which they have launched. So right, so far they've launched in two or three markets, Atlanta, Dallas, and I believe Chicago is next. So we have exclusive partnership rights to sell that inventory..

Got it.

And have you guys or can you provide any sort of guidance, as far as like order of magnitude of the financial benefits from that, that you expect?.

I mean the financial benefits. I think will be in direct correlation to how fast they grow. But as I said, we're in two markets. So right now, it's not particularly material. But you know, the early indications are there is a fair amount of excitement in market about those products..

Okay, got it.

And then just lastly, when we think about Q3, you gave a little bit of guidance on pacings I mean how should, we think about Q3 versus Q2 from like a revenue and EBITDA perspective?.

Well, obviously, we gave guidance for 2022, but not for Q3,.

Q3..

Q4 and yes and okay, yes so the way to think about it is that the level of improvement will clearly moderate, because if you look at the second quarter, we were comped against a really brutal second quarter last year. We continue to expect improvement in Q3 versus 2019 on a relative basis.

But the actual magnitude of the improvement won't be as dramatic as the second quarter because we did have some recovery in the third quarter last year albeit muted..

Yes, so what I'm trying to figure out is like is Q3, is Q2 sort of a run rate for Q3.

So should it look pretty similar, the Q2, Q3 should look pretty similar to Q2?.

Yes, no I think you got to look at the Q3 versus last year. Look at what we've talked about in terms of pacing. And also remember Q3 last year did have a lot of political..

Right, okay..

Which we don't have this year, obviously..

Got it, okay. Thank you..

Thank you, Mr. Goldman. Our next question comes from the line of Brian Kessler with First Trust. Please proceed..

One quick question, the minority equity that you are going to own and WynnBET is that going to be pledges collateral for the term loan? Thank you..

Well, all of our assets are pledged as collateral so that's part of the pool..

Thank you..

Thank you, Mr. Kessler. There are no additional questions waiting at this time. I'd now like to pass back to the management team for closing remarks..

Thank you, everybody, for joining us today. And we look forward to speaking with you again soon. Have a great day..

That concludes the Cumulus Media quarterly earnings conference call. Thank you for your participation. Have a great rest of your day..