Cumulus CEO Mary Berner Discusses 'Perspectives' On Q4 Financial Call
March 11, 2016 at 5:22 AM (PT)
As ALL ACCESS reported YESTERDAY (NET NEWS 3/10), CUMULUS MEDIA fourth-quarter revenue fell 6.2% year-to-year to $308.8 million, with adjusted EBITDA off 30.3% to $63 million. Earnings per share fell from 2 to -2 cents. Broadcast advertising sales were off 0.5% to $290,445,000, with digital ad sales down 42.7% (blamed on the end of RDIO) to $10,000,000 and political advertising falling 78.3% to $2,321,000. Local sales slipped 0.6% to $171,523,000, while national fell 10.5% to $24,912,000 and network sales rose 2.8% to $94,010,000.
On the company's financial conference call, CEO MARY BERNER went into more detail, saying, "I want to share with you the perspectives I have gained since joining CUMULUS five months ago on the radio industry and on CUMULUS' place in the industry. Additionally, I'll give you some early color on the initiatives we have established to move the company from decline to stability, and ultimately to growth. One of the observations I made early on is that radio as an industry has some unique, enviable, and I believe underappreciated advantages, vis-à-vis new media and also in comparison to other legacy media."
BERNER detailed, "While I like radio's odds, there is no denying that the entire media landscape, digital included, is still in the midst of seismic change, and there will be winners and losers. What I have heard and learned over the past five months of extensive travel and group and one-on-one interactions with both employees and advertisers simply confirmed what I already believed, which is that while our challenges are formidable, CUMULUS certainly has the assets to become one of the winners if given a plan to deal with its operational issues and the time to leverage and build on its considerable strength. Again, I don't want to minimize our challenges. As you can see by the continued underperformance we experienced this quarter versus our peers, we have a lot of work to do to stabilize the business. We are organizing that work-around for foundational issues which I believe are responsible for our underperformance, and I will give you some context for the moves we are making to correct CUMULUS' trajectory."
Addressing past mistakes, BERNER said, "a well constructed operational plan wasn't or couldn't be executed at CUMULUS due to a lack of management tools and information, as well as a misalignment of authority and responsibility across many functions. Second, the company had a corporate culture characterized by a lack of focus, accountability, and collaboration and under-investment in human capital, which collectively resulted in significant turnover and economic leakage. Third, revenue was meaningfully impacted by multi-year declines in ratings across the entire platform, in part due to a command and control operating strategy that often ignored local market dynamics. And finally, a substantial amount of leverage on the balance sheet has reduced the company's capital flexibility while increasing the pressure to execute in operational turnaround quickly."
In a move to show the changing culture at the company, BERNER noted, "one of my first decisions as CEO was to sell the corporate aircraft, a transaction we completed in DECEMBER. While we will use the $6.1 million of cash proceeds to pay down debt, we're taking the operating expense savings and funding a small merit increase pool, the first time we have provided that type of compensation to our employees in nearly a decade. This reallocation of resources will help to operationalize our goal of keeping our best employees and reducing voluntary turnover and the costs associated with that turnover. Additionally, it is another step toward making CUMULUS a pet place that could attract the most qualified people, thereby reducing our recruiting cost while upgrading the quality of our potential new hire pool."
"Moving to ratings," BERNER added, "this is both our most significant challenge and greatest opportunity. For a long time we failed to provide adequate support and tools to the programming organization. As a result, we have seen four consecutive years of sequential ratings decline hitting bottom in mid- to late-2015. On day one, we created a task force to address our ratings performance, and its deep-dive into what had gone wrong resulted in a thesis under which we are now operating and the underpinning of our ratings strategy which is that increased local input, authority, and accountability will result in a better product and ratings outcome, which will then translate ultimately into stronger revenue performance. To execute on this thesis, in late DECEMBER, we reorganized our corporate programming infrastructure to support local market decision making and accountability while providing appropriate checks and balances for high-impact decisions and for those decisions where the impact extends outside of one particular market. The redesigned organization balances local input and strategies with a wealth of specialized expertise from corporate's format specialists and analysts."