Welcome to the Cumulus Media Quarterly Earnings Conference Call. I'll now turn the call over to Collin Jones, Executive Vice President of Strategy and Development and President of Westwood One. Sir, you may proceed.

Thank you, operator. Welcome, everyone, to our second quarter 2024 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 as discussed in our filings with the SEC. 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-Q was also filed with the SEC shortly before this call. A recording of today's call will be available for about a month via a link in the Investors portion of our website. Now with that, I'll turn it over to our President and CEO, Mary Berner. Mary?

Thanks, Collin, and good morning, everyone. As anticipated during our last earnings call, the second quarter advertising environment continued to be challenging. Consistent with the pacing guidance we provided, Q2 revenue finished 2.5% below last year. However, our unrelenting focus on areas of the business that are in our control helped us mitigate the impact of soft demand to deliver $25.2 million of EBITDA and, excluding costs related to the exchange offer, generated $8.3 million of cash from operations. We also made meaningful progress in key priority areas during the quarter, specifically, toward our goal of driving outsized growth from digital revenue streams. We grew revenue in our strategically critical digital marketing services, or DMS, business by 24%. In the area of expense management, we reduced fixed costs by $4 million, further improving our operating leverage. With respect to fortifying our balance sheet, we completed the previously announced exchange offer and ABL upsizing actions that importantly extended our maturities to 2029 at attractive terms, and we bought back a small portion of our sub debt, which expires in 2026. Starting with revenue, in aggregate, our digital businesses now account for 19% of our total revenue and continued to grow, increasing 5% year-over-year. Digital marketing services again led the way with strong growth driven in part by the investments we've been making to expand our digital sales force and accelerate the rollout of Cumulus Boost, our portfolio of digital presence products. That growth on the heels of a similar increase last quarter also reflects our focus on creating integrated audio and digital marketing solutions that provide impressive results for our clients. On average, our campaigns outperform industry benchmarks by more than 25% across 15 key business categories. Our differentiated go-to-market strategy centered on sales reps fully embedded in their communities is another key contributor to our success. Having feet on the street allows us to understand and capitalize on the unique set of circumstances that individual customers face. For example, in Kansas City, our local DMS team recognized that a local specialty grocery chain was under siege from new stores opened by a couple of large national brands. The team created and launched an integrated audio and digital campaign that targeted the competitor's shoppers within a five-mile radius using special pricing and brand messaging. Only two weeks in, the campaign has massively exceeded the client’s targeted metrics and better yet has generated sales increases of as much as 7% in the stores owned by a very happy new Cumulus clients. Our ability to integrate this type of local insight into DMS campaigns across all markets is a significant advantage for us against competitors who are trying to sell from an out-of-market location. We are also benefiting from our ability to expand our relationship with existing radio-only clients to add DMS to their buys. Versus Q2 last year, we have increased the number of legacy radio clients who now purchased DMS from us by 25%. Overall, the results of our approach are evident. Our customer count is growing, up 20% year-over-year. We're seeing highs in customer retention, a 9% improvement year-over-year, with the average digital campaign order size for customers growing as well, up 3%. Most importantly, given our strong set of products, feet on the street sales capabilities, industry-leading campaign performance, and proven success at both developing new customers and converting radio-only customers to DMS plus radio, our upside continues to be tremendous. Turning to our other digital revenue streams, podcasting revenue increased in the quarter representing the fourth consecutive quarter of year-over-year growth, while streaming revenue declined, reflecting the previously mentioned expiration of a fixed-rate sales contract. Despite that, because we are able to better manage and optimize the monetization of our streaming impressions, which we've grown 25%, we remain confident that taking back sales responsibility for our station streaming inventory is a smart long-term move. On the broadcast radio front, our national broadcast advertising businesses, which consist of national spot and network revenue streams, together make up approximately 50% of our total annual broadcast revenue. While the national ad environment remains challenging overall, we did experience areas of improvement with positive national trends across a number of categories, including insurance, retail, and telecom. Additionally, advertiser demand for live sports continues to be very strong. For example, revenue for the NCAA men's and women's basketball championships both grew during the quarter, with the latter reaching all-time revenue highs. Further, we saw significant interest in our syndicated update covering the summer games in Paris with strong pre-bookings. In fact, we are on pace to deliver triple the revenue we did from the games two years ago. However, other categories such as financial services, recruiting, and home improvement remain depressed with advertisers citing the difficult macro and interest rate environment and significant obstacles to their spending. We remain hopeful that we will see their budgets improve once rates begin to decrease. But for now, the national advertising outlook remains uncertain. With respect to local spot, year-over-year revenue performance was similar to Q1, down 4%. High interest rates continue to be a factor, with both auto dealers, our second-largest mobile ad category, and the financial category, including banks, credit unions, and mortgage brokers suffering from low consumer demand, causing them to pull back further on their ad spend from the declines we’ve already seen in the first quarter. Notably, we’ve been able to offset some of the declines in these categories by generating significant local spot revenue growth from clients who have customers in multiple markets. We started focusing this customer category several years ago and have now developed considerable expertise in creating and executing multi-platform, multi-market campaigns to serve clients across all their locations. This product, which we call the on-home market, has delivered excellent results with Q2 multimarket local broadcast revenue up 65% year-over-year. Looking ahead, Q3 revenue is currently pacing down slightly, but our conversations with advertisers continue to focus on when, not if, they're going to return to more typical spending levels. Of note, the current pacing includes only the political revenue that's on the books at this point in time. With the change in the Democratic presidential candidates and to the extent that certain states become more highly contested than previously expected, we may see some upside given our footprint in battleground states such as Pennsylvania, Wisconsin, Georgia, and Arizona. Moving to expenses, as always, we are highly focused on cost reductions. I noted earlier our Q2 fixed cost reduction of $4 million, which brings our year-to-date total to $8 million on top of the $120 million of fixed costs that we've taken out from 2019 through the end of 2023. These reductions significantly improved the company’s operating leverage. This will drive EBITDA growth when ad demand picks up. They also helped to offset investments in our digital businesses, where we have been expanding our sales force to target the expansive DMS growth opportunity. Notably, in Q2, we increased our digital sales force for the sixth consecutive quarter, and we expect to continue growing this part of the organization. We are similarly disciplined on capital allocation. As a reminder, since our 2018 emergence from bankruptcy, we have prioritized organic growth, including in our digital businesses, leveraging the assets that we already have in place and third-party partnerships to fuel expansion. What we didn't do is make highly dilutive acquisitions, uneconomic podcast deals, and technology investments with no clear path to return on that investment. Instead, we walked away from many transactions that would boost profit over revenue in favor of a focus on earnings and cash generation metrics. To that point, our post-pandemic EBITDA recovery, free cash flow generation, and gross debt paydown have all been best among peers. We maintained these performance trends in the second quarter as we generated positive operating cash flow adjusting for the transaction costs related to the exchange, while also paying down a small portion of our remaining sub debt that's due in 2026. As a reminder to investors, given the current leverage levels, our capital allocation priority will be to continue debt reduction. Before turning it over to Frank, I want to reemphasize the importance of the financial flexibility and extended runway that we've created. Since we emerged from bankruptcy, we reduced gross debt by approximately 50%, which put us in a position to successfully negotiate a refinancing of our capital structure, extend our debt maturities to 2029 on favorable terms, and most crucially, increased the time we have to push through the economic choppiness and realize the value that we believe is inherent in the company. Cumulus has a strong set of assets, including a vast national platform that can reach audiences whenever and wherever they choose to listen, extensive feet-on-the-ground local sales capabilities, which allow us to walk products through the door in over 80 markets, premium programming across all genres, with particularly exclusive assets in sports and news shock space. Profitable and growing digital businesses, and an audio library filled with many millions of hours of relevant, engaging, and entertaining content, as well as a team with a strong track record of expense management and disciplined stewardship of capital. As we continue to execute against a tight set of priorities, we see many paths for maximizing the value of these assets on behalf of our shareholders. Courtesy of the time afforded by our recent refinancing, we have the breathing room to explore all these paths despite an economic backdrop, which remains a challenge for now.

Thank you, Mary. Q2 revenue was $205 million, down 2.5% year-over-year, consistent with the pace in guidance from our last call, while EBITDA was $25.2 million. As Mary mentioned, our DMS business continued to be our highest growth area with an increase of 24%, driven by more new customers, improved customer retention, and higher average campaign order size. From a category perspective, insurance, retail, and telecom were our top-performing key national categories, while our weakest were financial services, recruiting, and home improvement. In local spot, home products, travel, and auto supplies were our best-performing categories while financial, auto, and entertainment lagged. We generated $1.9 million of political revenue in the second quarter, versus $1.2 million in the same period of 2020. Total expenses in the quarter were essentially flat year-over-year, which included higher variable expenses associated with growth of our DMS business. It should be noted that in Q2 2023, expenses benefited from a $2 million one-time reduction from an acquisition related to an earn-out. Excluding that impact, year-over-year expenses decreased by approximately $2 million, reflecting the benefits of our ongoing fixed cost reduction initiatives. As Mary mentioned, we achieved $4 million of fixed cost reductions during the quarter and $8 million year-to-date. We continue to focus on disciplined cost actions to improve operating leverage, which will benefit EBITDA when the advertising environment recovers. Turning to the balance sheet, we finished the quarter with $53.5 million of cash. Excluding $16 million of costs related to the exchange offer, we generated $8 million of cash from operations. We repurchased $0.5 million of sub debt that matures in 2026, leaving a principal balance of approximately $24 million. As a reminder, with the completion of our exchange offer, we extended maturities to 2029, reduced the principal amount of debt outstanding at maturity by approximately $33 million, secured attractive interest rates, maintained covenant-like terms, and increased our ABL facility availability by 25%. Since the transaction was not deemed an extinguishment of debt for accounting purposes, the principal reduction of $33 million was not immediately reflected on the balance sheet; that will be amortized through the term of the debt. As such, this unamortized discount, which can be found in the footnotes of our 10-Q, will need to be excluded to arrive at the amount of debt owed. Taking this discount into account, our debt owed at maturity is $642 million. Looking ahead, as Mary said, our capital allocation priority is to pay down debt. In addition, we are reducing our CapEx guidance for the year to $25 million from $30 million. Lastly, we do not expect to pay a material amount of taxes this year. Turning to the third quarter, while some parts of the advertising environment are improving, there’s still considerable uncertainty in the macro environment, which is causing many advertisers to hold back spending. As a result, total company revenue is currently pacing down slightly. As a reminder, in the last presidential election, we generated $5.8 million of political revenue in the third quarter, which benefited from two contentious Senate races in Georgia.

Thank you. Our first question comes from Michael Kupinski with Noble Capital Markets. Your line is open. Please go ahead.

Thank you. Good morning, everyone. A couple of questions here. Regarding political, let’s start there in the second quarter, it seems like it was a little lower than kind of past cycles, and I was wondering if what your thoughts are about political to the balance of the year? Especially now that we see Harris on the race, does that improve the political outlook? And if you can give us your color on political?

Yes. Good morning, Michael, I’ll take that. Our second quarter political compared to 2020 was actually higher. And I mentioned that in the script; it was about $700,000 higher, so $1.9 million versus $1.2 million. The biggest driver there were stacks – I’m sorry, PACs that came in on the Republican Party side. But having said that, it was still a pretty low quarter. With regards to the balance of the year, spend – political spending did take a little bit of a positive in the quarter, given the uncertainty and all the noise around the Democratic candidate. All signs are here, particularly as races appear to be more competitive, that the dollars will be fairly significant. Having said that, and I mentioned this in our prepared remarks, we did benefit from two Georgia Senate races, which are not occurring this year. And also, as a reminder, most of the money that we get in political is really not on the presidential side but down-ballot.

Great. Thanks, Frank. On the network business, I was just wondering, typically, as we get to the prospect of lower interest rates, it seems like the network business typically in the past has always shown some significant improvement. It was just you seem like you – the trends appear; I guess that you might see some improvement, but you’re still cautious. I was just wondering if you can kind of set the stage for what your expectations might be on the network business in the face of the cost that we’re seeing on lower interest rates?

That’s a good question. So on the network, let me talk about the network first in the second quarter. The network in the second quarter was lower than the first quarter, and we talked about some of that being due to the timing of March Madness. As Mary mentioned in her prepared remarks with regard to demand for sports, the network will be much better performance in the third quarter, driven by sports. Now having said that, to your question, there’s no question that the higher interest rates are holding back spending. There’s a big question at this point, and we’ve seen this in other companies releasing earnings recently, whether or not rates coming lower are going to be accompanied by weaker consumer demand, which is something that we have to deal with in terms of the macro environment. Having said that, we do expect when rates come down in the past recycles itself in the future that, that should bode well for all advertising demand, including the network.

And Frank, does that include the podcast business as well, because I know that’s kind of tied to the national advertising outlook? Can you kind of just give us some thoughts there?

Yes, I can answer that. Yes, I think that's just – you could assume the same thing for the podcast business. We've had – we said in the last quarter that we had seen a nice clip of listenership growth. And so what follows, of course, is advertising growth. We also – what we've seen is a much stronger execution on our part to capitalize on the growth, and we've seen huge surges from key shows that we have. They tend to be more tied to the direct spot category, but which has been soft for all the same reasons. But we're – because of the significant listenership growth, we anticipate we’ll continue to grow that business.

Thank you. My final question. I know that you always look at cost reductions and so forth. I was just wondering, you already had some fixed cost reductions in the last quarter. I was wondering if you have identified any additional fixed cost reductions that we might see in the third quarter or for the second half of this year?

Mike, consistent with what we've said in the past, we wake up every morning trying to figure out how to generate revenues and be more efficient within the business. Each quarter gets tougher to reduce fixed costs, but we find a way to do it. At this point, I'm not going to – we can't give you guidance on what that's going to be in the third quarter, but that's part of our DNA. And we'll continue to do that not only in the third quarter but as we look for the rest of the year and going into next year.

Yes. And I would add that we continue to look at – yes, yes, and I would just add that we continue to look at real estate costs and contract costs regularly. We see improved functions through technology, better processes, et cetera. So as Frank said, we wake up and we think about cost reduction.

Thanks, Mary, and thanks for the color. That's all I have. Good luck, guys.

Our next question comes from Patrick Sholl with Barrington Research. Your line is open. Please go ahead.

Good morning. I just had a question about the digital segment. You talked about streaming revenue being down. I was just wondering if you could maybe talk about some of the challenges that you had in monetizing? I think you said that there was a pressure in growth. I was kind of wondering how – what sort of investments do you guys need to make in order to improve that monetization side?

Yes. I can answer that. As we said in the prepared remarks, in 2023, we benefited from a favorable third-party fixed-rate ad sales contract for a portion of our radio streaming – station streaming inventory. Basically, what that means is we were outsourcing the monetization because we didn't historically have the capabilities to do it ourselves. We now have those capabilities. So the contract expired, and that will affect our streaming growth rate in the short term. We do not expect that to continue. Taking back our spatial streaming inventory was the smart move strategically and financially because we wanted to be able to control our inventory and how it is sold and consumed. Controlling it directly in the national marketplace is a significant strategic advantage since we're able to bring our broadcast streaming inventory to market together. So it's a much more seamless experience for advertisers and for agencies. As we grow impressions, we're going to lap that contract, and you'll see some growth.

Okay. And then on your digital marketing services business. I was just wondering if there were any specific verticals that you view as really key to your sales efforts and if there are any investments that you would deem necessary to have a more tailored offering to those verticals?

Yes. I mean we've developed in the 15 verticals that we mentioned, where we outperformed the industry benchmarks amounting to 25%. In each one of those, we have a specific strategy and approach. The top categories include automotive for sure, HVAC and plumbing, hospitals, probably the top three, and home improvement. Actually, home improvement is number one. Each one of those is a specific go-to-market strategy and opportunity.

Okay, thank you.

There are no more questions. I'll now turn it back over to the company for closing remarks.

Thanks, everybody. Appreciate your time. Enjoy the rest of the summer, and we'll see you next quarter. Thanks.