Good afternoon. Thank you for attending today's Cumulus Media Quarterly Earnings Conference Call. My name is Nate and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

[Operator Instructions] I'd like to now pass the conference over to Collin Jones, Senior Vice President of Corporate Development and Strategy..

Thank you, operator. Welcome everyone to our fourth quarter and full year 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 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 are also on our website.

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

Mary?.

monetizing, promoting and growing personality-driven content across and within genres. We already represent some of the biggest names in podcasting with multiple shows like Ben Shapiro and Dan Bongino, placing in the top 10 of all podcasts. And our platform in aggregate generates over 1.2 billion downloads annually.

And as part of our broader audio-first strategy, we're the only commercial broadcaster that has successfully expanded podcast-native talent into broadcast distribution at scale. Additionally, in mid-2021, we rolled out our local podcast strategy.

As of this January, our local podcast in aggregate are already achieving a run rate of 100 million downloads and growing. After successful launches with sports journalist, Rich Eisen, reality TV personality, Lala Kent, and six new podcasts with the award-winning podcast studio, Imperative Entertainment, we're off to a strong start in 2022.

Just a few weeks ago, we launched a new partnership with The Bulwark, a leading political news and analysis network, founded by conservative commentators, Bill Kristol and Charlie Sykes. For our streaming platform, we continue to find ways to leverage and expand the distribution of our extensive inventory of exclusive premium content.

For instance, in addition to the many other aggregation outlets we already use to generate impressions. In 2021, we increased our distribution of our radio station streams by adding them to the Odyssey platform.

Many of our iconic local brands are also developing and distributing additional content as well as existing broadcast content through new platforms.

For example, in Nashville, 104.5 The Zone has substantially increased its broadcast distribution by video-live streaming its local sports programming as well as creating new original sports content on YouTube and Facebook, Twitter and Twitch, which in that case, generated more than 4 million views.

These kinds of natural extensions of our strong local brands increased audiences, driving valuable new monetization opportunities for our stations. Local digital marketing services grew substantially in 2021 as well, up more than 30% year-over-year.

We deliver a full suite of digital marketing services and campaign products, which allows us to leverage our strong SMB relationships and know-how to act as the single source to meet their digital needs.

Additionally, given that know-how, we were able to develop five unique ad solutions this year that can only be bought from Cumulus, which were nice drivers of revenue growth. This segment, SMBs with fewer than 50 employees constitutes the market estimated to be approximately $15 billion and growing around 5% to 10% a year.

So as such, we see a lot of room to run in this area as we add local digital sellers who can take to market existing and additional products that we create ourselves or have access to through partnerships.

So moving from revenue to expenses, our EBITDA improvement in 2021, up 66% year-over-year and 127% on an ex-political basis, was driven not only by revenue growth but also by meaningful cost reductions.

We continue to increase our guidance on fixed cost reductions as the year progressed as we benefited from business process improvements, technology implementations, facility rationalization, contract renegotiations and personnel actions.

Overall, compared to our 2019 baseline, we have reduced fixed costs by more than $75 million and with the actions taken in the back half of 2020 throughout 2021, achieved a 500 basis point increase in EBITDA margin year-over-year. Most importantly, these cost reductions came with virtually no impact to revenue. Moving to the balance sheet.

In 2021, we paid down $176 million of debt and finished the year with $177 million of cash. Since mid-2018, we have reduced net debt by over $625 million or more than 50% with approximately $220 million of that debt reduction occurring during the past two COVID-impacted years.

Our net leverage has declined from 11x at its highest during the pandemic to 4.7x at the end of 2021 with, as I mentioned earlier, an expectation of further rapid deleveraging this year.

2021 was also a year of significant advancement of our multiyear strategic repositioning from a one-dimensional radio-first business as in one product, distributed one way consumed on radio devices and on a set schedule to a multidimensional, multiproduct, multichannel, on-demand, audio-first media company.

On top of the hundreds of new local podcasts leveraging our local brands and talent, we also executed multiple national sponsored content partnerships, utilizing unique and exclusive assets, in particular, our network and podcast talent to create bespoke live broadcasts on major social platforms like YouTube and Instagram for over a dozen brands like Remy Martin, ExpressVPN and Ring.com.

And speaking of exclusive assets, we were delighted to consummate a multi-year renewal of our relationship with the NCAA. As we head into March Madness, this deal maintains Westwood One's position as the exclusive partner to the NCAA across broadcast radio, digital audio, distribution and content licensing across all NCAA sports.

Additionally, we developed and brought to market several new multi-platform ad products for local and national clients, resulting in a more than 500% increase in multi-market package revenue. And these are just a few examples of the progress we're making in our strategic evolution.

With this positioning, our strong financial results and outlook, our rock solid balance sheet and potential to return capital to shareholders in the back half, we continue to believe that there is tremendous upside for our shareholders. With that, I will now turn the call over to Frank to go through the numbers and outlook in more detail.

Frank?.

Thank you, Mary. It's great to speak with all of you again. As Mary mentioned, 2021 was a pivotal year for Cumulus. I'll start by walking through this quarter's numbers in more details. We finished the quarter with $252 million of total revenue, up about 3% from Q4 2020.

More notably, excluding political, total revenue in the quarter was up 8% versus the prior year. This increase represented continued sequential improvement versus 2019 as our fourth quarter revenue was down 10% versus Q4 2019 as compared to down 14% in the comparable third quarter periods.

Digital revenue continued to be a strong catalyst in our growth, increasing 47% year-over-year.

From a category standpoint, we saw the most year-over-year improvement in sports betting, which, of course, is coming off a small base as well as entertainment and travel, which are still down significantly versus 2019, we're trending in the right direction.

Professional services continued its strength on a year-over-year basis and also finished the quarter above 2019. Political was down $12.9 million, reflecting an off-cycle year. Auto, which we explained about previously, continue to be weak and remained down more than 40% from 2019.

On the expense side, total expenses in the quarter increased by approximately $3 million year-over-year, primarily driven by the return of costs related to temporary reductions as well as higher variable costs and higher revenue.

The combined revenue and expense performance resulted in EBITDA for the quarter of approximately $43 million, which is up from $40 million in the fourth quarter of 2020. Excluding the impact of political, EBITDA was up by over $15 million or 57%. Moving to our full year results.

We generated $916 million of revenue, which was up 12% year-over-year or 15% on an ex-political basis. Similar to our fourth quarter results, digital led the way growing 48% on a year-over-year basis. Historically, we have said that our three digital businesses each represented about a third of our total digital revenue.

So with the fast-paced growth in podcasting, that business now represents more than a third of that number, with C-suite and streaming making up the balance. On the expense side, total expenses increased by approximately $47 million year-over-year.

As with the fourth quarter, the increase for the year was driven by the reversal in temporary cost reductions as well as higher variable costs and increased revenue. These increased costs were offset in part by the fixed cost reductions we have aggressively implemented during the quarter.

As Mary mentioned, our fixed costs are now down more than $75 million versus our 2019 baseline and we continue to look for ways to reduce expenses while continuing to invest in our growth initiatives.

EBITDA for the year was approximately $135 million as compared to approximately $81 million in 2020, an increase of 66% or 127% on an ex-political basis.

Looking ahead to the first quarter of 2022, while we're still experiencing challenges from the auto supply chain and labor shortages, the Omicron variant has not impacted the business nearly to the extent that Delta variant did a year ago. We are currently pacing up the low teens versus 2021.

As Mary alluded to earlier, our WynnBET partnership concluded sooner than expected. While we preserve the relationship through much of Q1, the unwind resulted in a termination payment in Q1 as well as the return of previously committed inventory and sponsorships that we're now free to resell.

We will provide you with more detail on our next earnings call. Also, while our 2022 EBITDA guidance range of $175 million to $200 million remains unchanged, the termination of the WynnBET partnership and continued delay in the auto recovery due to supply chain issues means the upper half of the range would be harder to achieve.

Copy with modeling, we expect CapEx to be in the range of $30 million in 2022, relatively flat in comparison to 2021. And for 2022, we expect to pay cash taxes of around $10 million in comparison to total cash taxes of approximately $6 million in 2021. Now moving to cash on our balance sheet.

Cash from operations for the quarter was approximately $35 million. CapEx for the quarter was $7.1 million. For the full year, we generated $68.5 million of cash from operations and received forgiveness of $20 million of PPP loans. We ended the year with $177 million of cash and $629 million of net debt.

Combined with our strong operating performance, we finished the year with net leverage of 4.7x down from 8.7x a year ago. As we focus on to continue to delever, we are revising our long-term net leverage target to below 3.5x and below 4x.

As Mary mentioned, we expect to reach our new target by the end of the year, and as a clarification, our expectation is to be below 3.5x at the end of this year, not below 3x.

Notwithstanding the new leverage target, we are positioned to potentially return capital to shareholders in the second half of the year but at the same time, being able to maintain a strong liquidity position and flexibility for accretive M&A. With that, moderator, please open the line for questions..

Absolutely. [Operator Instructions] Our first question goes to Dan Day with B. Riley Securities. Dan, your line is open. You can go ahead..

Hi, Mary and Frank. Thanks guys for taking my questions. Yes, first one, just on the EBITDA down to the free cash flow bridge. So just the interest expense is pretty straightforward and I know you went through the cash tax expense, I missed that, so if you could run through that one more time.

And then just expectations for CapEx, any one-time sort of working capital things to think about for the year, just so we can get sort of down from EBITDA to where that free cash flow should land for 2022..

I'll take it, Dan, and thank you for the question. It's Frank. So interest expense is fairly straightforward to model out. We did mention that CapEx will be in the range of $30 million this year, and cash taxes in the range of $10 million, and that cash tax will actually vary based on where we end up the year on EBITDA and earnings.

Now with regard to working capital, similar to what we saw earlier this year as revenue increases will have a slight use of working capital in the early part of the year. But as we go through the normal cycle of collections and levels off, that should reverse itself.

But I would expect a small use of working capital through the year as our revenue recovers..

Great and thank you. And then just one on the network side. The broadcast looks really strong, at least stronger than I had modeled. The network revenue line slightly down year-over-year.

Just anything in the quarter to point to there and sort of how we should be thinking about modeling network versus kind of spot national and local moving forward?.

Right. So on the fourth quarter, I would say the network is really based on a mix of business. And also, it feels like a long time ago, but in the middle of the fourth quarter, we had, particularly in the Northeast and the Southeast, you had Omicron and that definitely impacted network type guys in terms of band and being slower.

So I would not view the fourth quarter decline as anything significant. It was down to [indiscernible] was up, but I think it's really a mix. And as I mentioned, we're pacing in all of our categories on a total basis in the low teens, up low teens, which would include improvement in the network as well..

Great. And then just last one for me. Just on lowering the leverage target down to 3x.

Just if you could walk us through your thinking on why you did that? Is it just the cyclicality of the business and you think that's more sustainable than 4x or just anything else you can provide on the decision to walk that down a bit?.

Sure. Let me clarify for all, and I mentioned at the end of my prepared remarks, our new net leverage target is 3.5x, down from 4x. So please note that. So look, we think that lower leverage achieves many objectives that benefits all of our stakeholders and let me go through the way we're thinking about it.

First, we've learned that through the pandemic, having lower leverage gives us more flexibility and buffer in dealing with unforeseen events; secondly, having lower financial risk should produce over time, the equity risk premium in our stock; third, lower leverage provides us with additional flexibility to do accretive M&A as and if opportunities arise; and the fourth, having lower leverage gives us more flexibility around return on capital.

And we add it all together, having the lowest leverage in the audio industry, combined with the potential returning cash to shareholders in the second half of the year, not only distinguishes us from our peers, but also positions us well to further enhance shareholder value from the stock price levels, which we believe is undervalued..

Awesome, guys. Well, thanks for your time. I will turn it over..

Thank you, Dan. Our next question goes to Mike Kupinski with NOBLE Capital Markets. Mike, your line is open. You can go ahead..

Thank you and congratulations on your quarter. I was just curious, just to kind of flush out the momentum you're seeing in the first quarter.

Do you feel like that there was some money left on the table in Q4, particularly in core spot given the Omicron and things that were going on in that particular quarter and that things have kind of – momentum has kind of picked up from the fourth quarter.

And if you can give me a sense of maybe some of the advertising categories that you're seeing strengthening as you go into the first quarter?.

Sure. Hi, Mike. Thanks for the question..

Great. So….

Yes, sorry. I would say we're definitely seeing improving advertising sentiment. As you mentioned, we could see that in our pacing. And we've got several categories that are now exceeding or very close to 2019 level.

So you're seeing an upsurge in government, sports betting, as I mentioned, professional services, general services, I think, financial is another big one. So – and what we're also seeing in first quarter, I'm not sure it's left over, but it's – I would tell you that there is more physical presence-based categories, events, restaurants.

And there – those categories are leading the way in terms of year-over-year pacing. And then you've got some big ones that continue to grow sports betting and then we're seeing certainly crypto is a potential emerging and big category.

The big one, of course, which is auto, it continues to be sluggish, but we are seeing some green shoots in the larger markets as they start to get more deliveries. So I would say the – it's a nice change in sentiment that we're seeing.

And as Frank mentioned, right in the middle of December, suddenly Omicron hit hard, especially in certain parts of the country. So there is a little bit of pent-up demand there..

And I know, Mary, that you prided yourself on reducing fixed costs significantly in 2021 in 2020.

Can you talk a little bit about how you view expenses as you go into 2022 and 2023? Particularly given the inflation and things that are – the cost pressures that we all see, I was just wondering if you can give us your thoughts about how you anticipate that we will see expense growth going forward?.

We're not guiding on expense growth going forward now. But what I would say is that we are very, very disciplined about managing our expenses, and we are relentlessly focused on process improvements, contract negotiations at thousands and thousands of contracts. We're in the process right now of looking at our real estate footprint.

So we're very – we're disciplined. We're good at executing in terms of expense reduction. So we continue to focus there as a way to offset what as you say, or certain inflationary – uncontrollable expense increases. But we do not anticipate a lot of expense growth, obviously, other than variable….

And then in terms of – yes, in terms of your debt teardown, you mentioned the real estate sales, which has allowed you to accelerate your debt teardown. Can you kind of give us spring for us the thought in terms of further real estate? I would imagine that you may not have as much real estate as impactful as some of those that you've already sold.

But can you kind of give us some idea or sense of the magnitude of further real estate sales?.

Yes. I mean, to your point, the most of the big – the opportunities we've already taken advantage of. So we've got a lot of – when you've got 80-something markets, you've got a lot of buildings, a lot of leases, many of them are owned. So we're just scrubbing every single market just to see where the opportunity is and a lot of its reduction in space.

Like everybody else, we learned that we could work differently. And so, for example, our entire sales organization now works largely remotely. And that's 800-plus people. So that's the kind of thing we're looking at.

I don't know, Frank, do you want to add anything to that?.

Yes. The only thing I would add and you'll note in our press release, in the fourth quarter, we did have restructuring charges in excess of $7 million. Most of that was really related to reducing the real estate footprint.

And so we took a lot of actions last year, and there's a lot more that we're going to look at this year, may not be the same size, but it's just a continuous look at improving our cost structure, getting the right space for what we need..

Got you. And I know that you may not be able to answer this question, but I thought I might ask it anyway. What are your favorite ways in terms of return of capital? Obviously, I think it's great that you are contemplating that.

And so, are there any preferred ways that you are considering at this point?.

Thank you for asking the question. But as you can imagine, once we're ready and if we're ready to have that return of capital discussion publicly, we'll talk more about it. But we'll evaluate all the standard ways to return capital, which includes dividends and stock repurchase at the right time..

I suspected that, but I thought I would ask anyway. Thank you so much..

Thank you, Mike. Our next question goes to Avi Steiner with JPMorgan. Avi, your line is open. You can go ahead..

Thank you and good afternoon everybody. A couple of questions here. First off, I just want to get a sense. I think you'd mentioned a couple of times sports gaming continues to grow. You also talked about WynnBET terminating, and I'm trying to understand kind of those – maybe those different factors.

And I'm wondering if there's any pullback you're seeing within that category, given comments from Caesars the other day. And then I've got a couple more..

Sure. So look, in the first quarter, we continue to pace up very nicely in the sports betting category. And in the fourth quarter, partly driven by WynnBET, our growth was over 130% in the fourth quarter just in the category.

So the implication – and I'll – we'll talk more about WynnBET in the first quarter in terms of financial impact, but most importantly, we have the inventory of sponsorships to resell. We do business with over 20 sports betters. More states are coming online. We have a unique group of assets that can deliver the value to the operators.

And so we feel comfortable that we're going to be able to sell that inventory or large component of that inventory and not exactly the same way. Now one of the things we can't predict is how robust and how long and how large the advertising has been – will be for the category.

And so that's something that will all remain to be seen, but we still believe there's going to be a top 10 category for us, and that hasn't changed regardless of WynnBET..

Sure, I appreciate that and the unique asset base is certainly noted, certainly for that category. On the podcast side, if I can, obviously, it's good growth. And I think if I heard the opening commentary correctly, it's now more than a third of kind of digital as you characterize it.

So as that business has evolved and grown and the industry around you has evolved as well, there has been some bulking up. I'm curious how the margin profile is evolving for your podcasting business..

Yes. So it's – as we've been consistent specifically it's on the stories that our podcasting business, we've grown partnership with broadcasters and talent, and we do own – we have O&O podcasters, but a large component of our stable, we basically represent them from an advertiser sales perspective.

So that gives us the benefit of not spending a ton of money in terms of greenfield production or be in a studio. And so we've grown and we've been consistent in saying this, we've grown podcasting profitable from day one. And the margins continue to be fairly steady as we grow.

Now sometimes we'll have to add more infrastructure to support the growth and take the while for the revenues to catch up to the incremental investments, but there hasn't been any material change in terms of the margin profile of that business.

Having said that, the margin profile of that business is a different profile given the rep nature than the broadcast business, but it's grown nicely and it's profitable and it's an important part of our business..

Great. And then pointing to your sector low leverage, which hasn't kind of noticed certainly the credit community. You've got your [indiscernible] quarter notes that are callable, I'm curious how you think about that potential opportunity. Obviously, rates have moved around here, but again, your leverage is moving in the right direction.

And I don't know, Frank, if you want to comment on what, over time, the optimal cap stack is for you. And I appreciate you're all taking the questions. Thank you..

Sure. Well, look, we talked about our net leverage target. We have a lot of cash on the balance sheet. And one of the things about reducing leverage is in addition to all the things we've – I mentioned in terms of an earlier answer, reducing leverage also increases the cash flow of the business. And so we're confident of that.

And so we're very aware of that, as you can imagine, those bonds are callable on July 1. And we'll just look at the market at the time to either reduce more debt then, later, refinance, it's obviously top of mind, and we're following that very closely.

With regard to the cap stack, right now, we have exception with the ABL and all secured capital structure. You know our inventors pretty well. We have lots of flexibility under our secured indentures and our debts going lower and lower and lower.

So I don't know if it's going to change dramatically, your question between secured and unsecured needs to be seen, but the key thing is our net leverage is going – our net leverage to growing lower, absolute leverage is going lower, we generate more cash flow and that creates a virtuous cycle and good things for us..

Thank you all for the time..

Thank you, Avi. There are no further questions registered at this time. So I'll pass the conference back over to the management team for any closing remarks..

Okay. Thank you everybody. Appreciate your time and we all look forward to speaking again next quarter. Have a good evening..

That concludes today's call. Thank you for your participation. You can now disconnect your line..