Good morning, ladies and gentlemen. Thank you for attending today's Cumulus Media Quarterly Earnings Conference Call. My name is Jaquita, I will be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to your host, Collin Jones, Senior Vice President of Corporate Development and Strategy.

Collin, please go ahead..

Thank you, operator. Welcome, everyone, to our first quarter 2022 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, though 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.

We also posted a Q1 investor update to our website, which speaks to this quarter's highlights and accompanies the full investor presentation that we first released last year and updated earlier this year. We encourage you to download that if you haven't already. A recording of today's call will be available for about a month via a link 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.

The strong start we're seeing in 2022 is driven both by our existing stable of content partners as well as new relationships such as the partnership that we launched in February with the Bulwark, a leading political news and analysis network founded by conservative commentators, Charlie Sykes and Bill Kristol.

Additionally, we're seeing great traction with the launch of our local podcasting effort. Revenue in Q1 has doubled, and importantly, our local podcasts are now on a run rate of nearly 100 million annual downloads.

Second, we continue to build the capabilities and assets of our local digital marketing services business, which grew 35% in Q1 and represents about 1/3 of our digital revenue.

Most recently to complement the advertising campaign products that have been central to our digital marketing services growth over the last few years, we've added a suite of integrated presence products ranging from listings to reputation management to website development and SEO. As we mentioned in our investor presentation, the total U.S.

TAM in this market is estimated -- is an estimated $15 billion and growing 5% to 10% a year.

While there are many small digital agencies that have built paid digital media capabilities as well as several large providers of single-point solutions, there are very few companies that can successfully offer SMBs, the full spectrum of digital marketing solutions and are able to do so profitably and at scale, but we're doing just that, providing advertisers with unique packages, often combining audio and digital advertising seamlessly and with improved ROIs.

As such, we are seeing success in leveraging the relationships that we have with tens of thousands of local and regional businesses to tap into this growing market.

In addition, as we grow our sales force and develop their digital capabilities, we've been able to successfully expand the range of customers we are serving to include companies who operate across multiple markets.

Often starting with an existing local relationship, we've substantially increased the number of multi-market packages sold, which, on average, generate significantly higher revenue than a typical local market order. Collectively, in Q1, multi-market packages drove about half of our digital marketing services revenue growth.

And we've continued to build our streaming platform. As part of our recent NFL renewal, we secured digital streaming rights for the first time.

This means that in addition to the more than 55 million broadcast listeners we already serve, we will be accessing fans who prefer to listen to NFL games on affiliated stations primary digital platforms and on the NFL app.

This inclusion of the streaming rights and the extension of our 35-plus year partnership is a good example of our continued progress in broadening our reach to audiences across audio platforms and a prime example of Cumulus' audio-first strategy.

Coming to full circle, as I mentioned at the beginning of the call, several years ago, we created a strategy to position the company to generate sustainable and profitable growth, which yields strong free cash flow and a rock solid balance sheet.

As our ongoing performance demonstrates, we've seen great success implementing that plan and fully expect that success to continue. With our current momentum, positive outlook for the rest of the year, strong balance sheet and new capital return program, we are better positioned than ever to create meaningful value for our shareholder.

With that, I will now turn the call over to Frank to go through the numbers and outlook in more detail..

Thank you, Mary. We finished the quarter with $232 million of total revenue, 15% higher from Q1 2021. Once again, digital continues its strong growth, up 18% led by digital marketing services, which grew 35% year-over-year and podcasting, which grew more than 20%. Local spot also continued its strong recovery, growing 13%.

From a category standpoint, we continue to see strong growth in professional services, driven primarily by higher spend from recruiting companies. We also saw a nice growth among many physical presence categories, including live entertainment, restaurants and travel as we continue to see a strong rebound driven by states relaxing COVID restrictions.

Auto, which we have spoken about previously continued to be weak, down more than 25% from Q1 2021 and 50% from Q1 2019. On sports betting, as we mentioned last quarter, the WynnBET partnership ended during Q1. While we preserve the relationship through much of Q1, the unwind also resulted in a termination payment, which was recorded as other revenue.

The majority of this termination payment represented an essence a pull forward of revenues that we otherwise would have expected from the relationship. This amount is in the mid-single-digit millions.

Although the partnership concluded sooner than we expected, we continue to believe we are well positioned to serve the sports betting category given our strength in converting radio audiences to users, particularly among country music, sports and news talk. Moving to expenses.

Total expenses in the quarter increased by approximately $8 million year-over-year, primarily driven by higher variable costs and higher revenue. The combined revenue and expense performance resulted in EBITDA for the quarter of $31.2 million, which is up approximately $22 million or 250% year-over-year.

As Mary mentioned, this represented a 900-basis point improvement in EBITDA margin, reflecting our enhanced operating leverage. Turning to the second quarter. We are seeing the continued impact of supply chain shortages across sectors, particularly on auto and telecom.

Offsetting this, we are benefiting from the ongoing rebound in physical presence ad categories such as entertainment and travel, as well as some political spend and continued strength in professional services. As such, total revenue in the quarter is currently pacing up in the mid-single digits versus Q2 2021.

With trailing 12-month EBITDA of $157 million, we are tracking well against our EBITDA guidance for the year of $175 million to $200 million. Moving to the balance sheet and cash flow. We generated $24.3 million of cash from operations during the first quarter, while paying down $12.5 million of debt.

We ended the quarter with $793 million of gross debt, $181 million of cash and net debt of $612 million. With our strong cash flow generation and improvement in EBITDA, we continue to roughly deliver ending the quarter with net leverage of 3.9x, which to reiterate, is the lowest it has been in over a decade and is the best among peers.

For the year, we continue to generate significant free cash flow. We expect CapEx of around $30 million for the year and cash taxes in the low double-digit millions range. As revenue grows, working capital should be a slight use of cash. Doing the math against our 2022 full year EBITDA guidance, free cash flow per share for the year will be meaningful.

As Mary mentioned, given our first quarter results, free cash flow outlook and strong balance sheet, we announced a $50 million share repurchase program, which we expect to begin this program in the very near term.

And with the planned share repurchases, we expect to be below 3.5x net leverage by the end of the year with significant additional liquidity available for accretive M&A as such opportunities present themselves. With that, moderator, please open the line for questions..

[Operator Instructions]. The first question comes from the line of Michael Kupinski with NOBLE Capital Markets..

Congratulations on your quarter. A couple of questions here regarding spot advertising. Spot advertising still, even though we had a very strong recovery, nice bounce in Q1, still is not above where it was in the Q1 '20.

I was just wondering if you could talk a little bit about -- do you feel like the variance is virtually all auto? Or what do you account for the variance between what hasn't recovered from the '20 levels and what your expectations might be as we kind of cycle through into 2023?.

Well, it's well too early for us to be talking about 2023 as we have to go through the year, as you can imagine. You're correct. The spot or broadcasting revenues are still below the 2019 levels.

I'm pleased to say, though, the improvement sequentially over the past 5 quarters have been significant, and we were -- not this is the metric that we're proud of, but if you look at the total revenues for the company, and this is away from spot, total revenues are down less than 10% versus 2019.

With regard to the categories, Auto is the largest contributing factor or the drag in terms of revenues. And we talked about that in our prepared remarks. Having said that, supply chain shortages and labor shortages are really still impacting other categories. So I wouldn't ascribe it all to the auto.

But as we said, for the first quarter, the trends continue to be positive, and we'll see how the balance of the year is. And hopefully, we can talk about 2023 later on this year..

Got you. And then as we kind of look in corporate expenses were a little bit higher, and I know this -- we could talk about this some other time, but it was a little bit higher.

Was there any extraordinary corporate expenses in the quarter? Or is that kind of a good run rate for the year?.

That's actually a good and very insightful question. One of the things that we're doing this year is we're centralizing a whole bunch of functions which previously were out in the fields which would have been recorded in SG&A, and it's a lot of the back office, finance, HR functions.

So as a result of that project, we're actually going to be more efficient, have less people doing it. But from a geography perspective, those expenses, which previously were at SG&A roll into corporate now, and that's largely driven by the centralization of functions and that's really what's driving that..

And Mike, let me just add another point to what Frank said about revenue performance versus 2019. Because we've taken out such a meaningful level of cost, we can see a meaningful EBITDA recovery without getting back to 2019 levels. So I think that's an important point to make..

The next question comes from the line of Dan Day with B. Riley Securities..

Just first off the bat, awesome to see you guys bringing the buyback in place. I think that's something we've been looking for, for a while, and you've done a great job with the balance sheet. So congrats on that.

Just on top of that, just any thoughts on sort of the best way to -- your thoughts on how to return capital to shareholders sort of on a through-cycle basis, balancing between this share repurchase program here, maybe a dividend longer term.

Just kind of how you guys think about that with obviously a pretty robust free cash flow profile for the next few years, it looks like..

Thanks, Dan. As you can imagine, when we look at return of capital with the Board late last year, during the first quarter and the second quarter, we looked at the wide range of alternatives, including dividends, sizing of the share repurchase program, et cetera.

And where we concluded as a first step is this $50 million share repurchase program, which is as a dollar amount, a substantial amount of the market cap of the company, which we intend to retire through shares in the near term.

And as I mentioned, that we'll be below our 3.5x net leverage, notwithstanding the plans, the share repurchase, which will start soon. With regard to dividends and other alternatives, we'll assess that as we get on as we work through the share repurchase program.

But given where our stock price is, given the fact that we're undervalued, we think the best value for all shareholders is retiring shares at these attractive levels. And that's why we went and the Board agreed to go through this program in this way..

Yes. I would totally agree with that. Just turning to the operating results a little bit. On the digital side, one thing you guys gave the breakouts for podcast and digital marketing services. It looks like the streaming radio side, sort of the implied number there was a bit of a drag on growth.

Just any commentary you can provide on advertising demand for the radio streaming side in particular, I would think that sort of a number of brands looking to get in the digital audio space, maybe that would be heating up a bit, but any commentary on that side of the digital bucket?.

Sure. Just as a reminder, last year, our digital revenues grew dramatically and have been consistent through the earnings call that part of that growth in terms of reported growth was a reclassification of some digital revenues, which previously had been recorded a spot, and that has to do with the streaming.

So I think part of what you're seeing is that the comparison of a big number, bigger number is tough. I would say in terms of the streaming numbers itself, I wouldn't take a lot in terms of competing demand. It just happens the quarter that it was a little bit slower than the other high-growth areas.

And we were pleased with that, particularly with the C-Suite digital marketing services up over 30%, podcasting over 20%. So in and of itself, yes, you look at the math, it brought down some of the growth rates. But as a part of the digital business, that's something that we're terribly concerned about at this point..

Great. And then last one for me. Just any update you can give on finding sort of a new flagship partner for sports betting, just with the WynnBET termination in mind.

Are conversations ongoing there? And I guess, is that sort of a near-term expectation or just take it as it comes?.

I can take that one. We're -- sports betting, even with the change of WynnBET was up in Q1.

But we do see a little bit of maturation in the industry with some of the small players are dropping out and the larger players are moving more into a maintenance mode and focused a little bit more on their cash flow given the significant valuation hits they've had. That said, we are in multiple discussions.

Our platform lines up very well against this category. And as more states legalize, we have a broad platform that is very attractive to these advertisers at scale. So it's ongoing..

The next and final question comes from the line of Jim Goff with [indiscernible]..

Okay. A couple of questions. First, following up a little on Mike's discussion about the radio revenues. There seem to be a significant difference in the pace of growth between spot and network, which I think tend to track one another fairly well.

Could you explain that variance? And what sort of pacings were you giving last quarter relative to this sort of performance? And in the first -- in the current quarter with the pacings, do you see a similar sort of variance developing?.

Okay. Thank you for your question, Jim. I'll start with your second question. The first quarter, when we had our call, we indicated company pacing was up in the low teens. When we had the call that also included, as I mentioned, that we had received already the WynnBET termination payments, and that would have been embedded in that number.

So the way to think about the first quarter performance, we ended up, up 15% versus the low teens pacing. So that's the first quarter. So we were a couple of hundred basis points better or so. Now going to the second quarter, -- and in the first quarter, all the categories, all the channels were strong.

Local was the strongest, followed by national than network. As we move into the second quarter, the local continues to be fairly strong within our pacing numbers. We have seen some slowdown in national and network and it's early on in the quarter.

We have typically have been able to exceed throughout coming out of COVID, the final quarter results versus a pacing at a time. But in this quarter, I would say that national network gets slowing down a little bit. I don't know whether or not that's in response to what the Fed may do and concerns about economic weakness or a recession.

But the whole area with national and network as we see in the past, it tends to be very lumpy and then to come back quickly or slow down dramatically. So that's all embedded in our pacing of mid-single digits for the quarter. And of course, we'll have more to talk about when the results come out..

Okay. A couple of other things. One, as you've discussed, coming out of COVID, I'm wondering what the audiences post-COVID look like in terms of any differences in time frames, access points, kinds of listening or other noteworthy elements..

Well, we're still feeling the effects of the pandemic and the up and down of the COVID variants, particularly major markets, which have been more tentative about return to work. But we're hopeful for additional recovery as the summer comes and the country settles back into what the CDC is calling the endemic stage.

But we're seeing encouraging data with improvements in weekly cume pacing better in the smaller markets. But I'd point out that radio continues to dominate the ad-supported audio with over-the-air and streaming. It's about 72%.

So in terms of -- to the patterns, what we saw during the pandemic where people were listening later, that seems to have gone back to the way people used to listen. But we're seeing some pretty encouraging improvements, and we expect that to continue as the summer goes on and as the country continues to settle down..

Okay. One last one. You mentioned earlier the potential for accretive M&A.

I'm wondering how aggressive you intend to be, and can you talk about the size of markets or any other particular -- is it geography? What would you be looking for if you were to launch any sort of M&A program?.

Thank you for the question. With regard to M&A, we've been very consistent in terms of our messaging, which is we look at things very critically to make sure they are accretive and additive to the business and additive to all shareholder value.

And with our excess liquidity, we have that flexibility, but we also know that given where our stock is, it's and how inexpensive it is, in our view, that's a good return on investment, that extra cash. So the areas that we continue to look at and look at aggressively when I say aggressively study the marketplace are principally in our digital areas.

Digital marketing services has been an area that we've looked at a lot. That has to be additive to what we're doing now and whether it's from a product perspective or reach or sales perspective.

We continue to look at podcasting from time to time, but that's more on content acquisition, we're adding partnerships as opposed to buying a tech stack where a lot of other companies have done.

And then in our legacy terrestrial radio portfolio, we're always looking at assets, whether or not it can complement a cluster that we have or if certain stations are held better another person's hands and we can extract economics from divesting. So those are the areas that we've looked at.

As you look at our pattern over the past many years, we have done some swaps. We've made some small acquisitions, but we spent a lot of time pruning the portfolio, which has helped us get to our balance sheet to where it is today, which is in a remarkable position considering where we were going into COVID -- coming into COVID..

I will now pass the conference back over to the management team for any additional remarks..

Thanks all for listening today, and we look forward to our next call. Thank you. Have a nice day..

That concludes the Cumulus Media Quarterly Earnings Conference Call. Thank you for your participation. You may now disconnect your lines..