Cumulus Reports Operating Results for Third Quarter 2014

ATLANTA, Nov. 10, 2014 (GLOBE NEWSWIRE) -- Cumulus Media Inc. (Nasdaq:CMLS) (the "Company," "we," "us," or "our") today announced operating results for the three and nine months ended September 30, 2014.

Operating highlights are as follows (in thousands, except percentages) (footnotes follow):

Results for Third Quarter 2014

Net Revenue

Net revenue consists of gross revenue less agency commissions, third party producer revenue shares and other direct costs. Agency commissions are variable as they are based upon a stated percentage of the Company's gross billings.

The following table presents our revenues, by source, as a percentage of total net revenue:

On an actual basis, net revenue for the three months ended September 30, 2014 increased $51.4 million, or 19.6%, to $313.9 million, compared to $262.5 million for the three months ended September 30, 2013. The increase resulted from increases of $39.1 million, $7.3 million, $3.1 million and $1.9 million in broadcast advertising, digital advertising, political advertising and license fees and other revenue, respectively. These increases were primarily attributable to the addition of the operations of WestwoodOne. The increases were partially offset by decreases in local spot and national spot revenue. The increase in political advertising revenue was due to additional activity associated with mid-term and gubernatorial elections in the current period.

On a pro forma basis, net revenues for the three months ended September 30, 2014 decreased $0.1 million, or 0.0%, to $313.9 million, from $314.0 million for the three months ended September 30, 2013. Broadcast advertising revenue decreased by $12.5 million. Net broadcast advertising revenue was down due to ongoing weakness in several large local markets that began in the second quarter of 2014; however, we believe that weakness has now largely dissipated into the early portion of the current quarter. National spot advertising was generally flat as we continued to take share from small competitors. Network advertising continued to see disruption following the acquisition of WestwoodOne in December 2013. We believe that process of reorganizing our network sales verticals is also now completed. Digital advertising revenue increased by $6.7 million, primarily due to increased Rdio user generation activity and digital commerce generated by our Sweetjack platform. Political advertising revenue increased by $2.9 million due to additional activity associated with mid-term and gubernatorial elections and license fees and other revenue increased by $2.8 million.

Content Costs

Content costs consist of all costs related to the licensing, acquisition and development of our programming including local and national talent costs and music license fees.

On an actual basis, content costs for the three months ended September 30, 2014 increased $41.0 million, or 62.6%, to $106.6 million, compared to $65.6 million for the three months ended September 30, 2013. This increase was primarily attributable to the addition of the operations of WestwoodOne.

On a pro forma basis, content costs for the three months ended September 30, 2014 increased $14.5 million, or 15.7%, from $92.1 million for the three months ended September 30, 2013. This increase was primarily attributable to investments in proprietary content to replace expiring third-party producer relationships at WestwoodOne. Several new radio stations being operated under local marketing agreements ("LMAs") in Chicago, Dallas and San Jose also contributed to year over year expense growth, as did the launch of a newly owned and operated station in the New York market. Previously contracted increases in sports rights and local talent bonuses for ratings growth in several large radio markets also contributed to year over year increases. Partially offsetting these expense increases were expense savings resulting from our ongoing integration of WestwoodOne.

Other Direct Operating Expenses

Other direct operating expenses consist of expenses related to the distribution and monetization of our content across our platform and overhead expenses.

On an actual basis, other direct operating expenses for the three months ended September 30, 2014 increased $20.7 million, or 20.8%, to $119.9 million, compared to $99.2 million for the three months ended September 30, 2013. This increase was primarily attributable to the addition of the operations of WestwoodOne and the LMAs in the Chicago, Dallas and San Jose markets.

On a pro forma basis, other direct operating expenses for the three months ended September 30, 2014 increased $4.9 million, or 4.3%, from $114.9 million for the three months ended September 30, 2013. This increase was due to ongoing investments in our radio market sales efforts, including items related to the extension of our national representation agreement with Katz Media. We also recorded additional one-time marketing expenditures related to the launch of our new radio station in the New York market and related to the rollout of our NASH Country brand across the platform. Timing of healthcare claims also increased expenses for the quarter, on a year over year comparison. Partially offsetting these expense increases were expense savings resulting from our ongoing integration of WestwoodOne.

Corporate Expenses, Including Stock-based Compensation Expense

Corporate expenses consist primarily of compensation and related costs for our executive, finance, human resources, information technology and legal personnel, and fees for professional services. Professional services are principally comprised of outside legal, audit and consulting services.

Corporate expenses, including stock-based compensation expense, for the three months ended September 30, 2014 increased $3.0 million, or 25.5%, to $14.8 million, compared to $11.8 million for the three months ended September 30, 2013. This increase was primarily due to a $2.1 million increase in stock-based compensation expense partially driven by stock options granted to employees of WestwoodOne and a $0.9 million increase in other overhead costs.

On a pro forma basis, corporate expenses, including stock-based compensation expense, for the three months ended September 30, 2014 increased $1.3 million, or 9.9%, from $13.4 million for the three months ended September 30, 2013. This increase was primarily due to stock-based compensation expense partially driven by stock options granted to employees of WestwoodOne.

Capital Expenditures

Capital expenditures for the three months ended September 30, 2014 totaled $2.2 million, comprised of ongoing maintenance and upgrades across our broadcast platform. Capital expenditures during the three months ended September 30, 2013 were $3.6 million.

Earnings Call Information

Cumulus Media Inc. will host a teleconference today at 4:30 PM eastern time to discuss its third quarter 2014 operating results. The conference call dial-in number for domestic callers is 877-830-7699. International callers should dial 660-422-3366 for conference call access.

Please call five to ten minutes in advance to ensure that you are connected prior to the presentation. The call also may be accessed via webcast at www.cumulus.com.

Following completion of the call, a replay can be accessed until 12:00 AM eastern time, December 11, 2014. Domestic callers can access the replay by dialing 855-859-2056, replay code 17617805#. International callers should dial 404-537-3406 for conference replay access.

Forward-Looking Statements

Certain statements in this release may constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such statements are statements other than historical fact and relate to our intent, belief or current expectations primarily with respect to certain historical and our future operating, financial, and strategic performance. Any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties. Actual results may differ from those contained in or implied by the forward-looking statements as a result of various factors, including, but not limited to risks and uncertainties relating to the need for additional funds to service our debt and to execute our business strategy, our inability to renew one or more of our broadcast licenses, changes in interest rates, the timing of, and our ability to complete any acquisitions or dispositions pending from time to time, costs and synergies resulting from the integration of any completed acquisitions, our ability to effectively manage costs, our ability to manage growth, the popularity of radio as a broadcasting and advertising medium, changing consumer tastes, the impact of general economic conditions in the United States or in specific markets in which we currently do business, industry conditions, including existing competition and future competitive technologies and cancellation, disruptions or postponements of advertising schedules in response to national or world events, our ability to generate revenues from new sources, including local commerce and technology-based initiatives, the impact of regulatory rules or proceedings that may affect our business, or any acquisitions, from time to time, other risk factors described from time to time in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2013 (the "2013 Form 10-K") and subsequently filed Forms 10-Q. Many of these risks and uncertainties are beyond our control, and the unexpected occurrence or failure to occur of any such events or matters could significantly alter our actual results of operations or financial condition. Cumulus Media Inc. assumes no responsibility to update any forward-looking statement as a result of new information, future events or otherwise.

About Cumulus Media Inc. (Nasdaq:CMLS)

Cumulus Media Inc. (Nasdaq:CMLS) combines high-quality local programming with iconic, nationally syndicated media, sports and entertainment brands in order to deliver premium choices for listeners, provide substantial reach for advertisers and create opportunities for shareholders. As the largest pure-play radio broadcaster in the United States, Cumulus provides exclusive content that is fully distributed through approximately 460 owned-and-operated stations in 90 U.S. media markets (including eight of the top 10), approximately 9,000 broadcast radio affiliates and numerous digital channels. Cumulus is well-positioned in the widening digital audio space through a significant stake in the Rdio digital music service, featuring over 30 million songs on-demand in addition to custom playlists and exclusive curated channels. Cumulus is also the leading provider of country music and lifestyle content through its NASH brand, which will serve country fans through radio programming, NASH magazine, concerts, licensed products and television/video. For more information, visit www.cumulus.com.

Non-GAAP Financial Measure and Definition

We utilize certain financial measures that are not prepared or calculated in accordance with GAAP to assess our financial performance and profitability. The non-GAAP financial measure used in this release is Adjusted EBITDA.

We define Adjusted EBITDA as net income (loss) before any non-operating expenses, including depreciation and amortization, stock-based compensation expense, gain or loss on sale of assets or stations (if any), gain or loss on derivative instruments (if any), impairment of intangible assets and goodwill (if any), acquisition-related and restructuring costs (if any) and franchise taxes.

Adjusted EBITDA is the financial metric utilized by management to analyze the cash flow generated by our business. This measure isolates the amount of income generated by our core operations after the incurrence of corporate, general and administrative expenses. Management also uses this measure to determine the contribution of our core operations, including the corporate resources employed to manage the operations, to the funding of our other operating expenses and to the funding of debt service and acquisitions. In addition, Adjusted EBITDA is a key metric for purposes of calculating and determining our compliance with certain covenants contained in our credit facility.

In deriving this measure, management excludes depreciation, amortization, and stock-based compensation expense, as these do not represent cash payments for activities directly related to our core operations. Management excludes any gain or loss on the exchange or sale of any assets as it does not represent a cash transaction. Management also excludes any gain or loss on derivative instruments as it does not represent a cash transaction nor are they associated with core operations. Expenses relating to acquisitions and restructuring costs are also excluded from the calculation of Adjusted EBITDA as they are not directly related to our core operations. Management excludes any impairment of goodwill and intangible assets as they do not require a cash outlay.

Management believes that Adjusted EBITDA, although not a measure that is calculated in accordance with GAAP, nevertheless is commonly employed by the investment community as a measure for determining the market value of a media company. Management has also observed that Adjusted EBITDA is routinely employed to evaluate and negotiate the potential purchase price for media companies and is a key metric for purposes of calculating and determining compliance with certain covenants in our credit facility. Given the relevance to our overall value, management believes that investors consider the metric to be extremely useful.

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP.

A quantitative reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, is provided below.

Reconciliation of Non-GAAP Financial Measure to Most Directly Comparable GAAP Measure

The following table reconciles net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA for the three and nine months ended September 30, 2014 and 2013 (dollars in thousands):

The following supplemental unaudited pro forma financial information is intended to provide you with information about how the WestwoodOne Acquisition and the 2013 Townsquare Transaction might have affected our historical consolidated quarterly financial statements during each completed quarterly period during 2013 and the year ended December 31, 2013 as if such transactions had closed as of January 1, 2013. This pro forma information is presented for illustrative purposes only, and should not be considered indicative of our actual historical financial position or results of operations had the WestwoodOne Acquisition or the 2013 Townsquare Transaction occurred as of the date indicated or any other date. This pro forma financial information should also not be considered representative of our future financial condition or results of operations.

Reconciliation of Pro Forma Non-GAAP Financial Measure to a Comparable Pro forma GAAP Measure

The following table reconciles pro forma net (loss) income to pro forma Adjusted EBITDA for each quarter during 2013, and for the year ended December 31, 2013 (dollars in thousands):