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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):

Three Months Ended September 30,
Actual Pro Forma (1)
2014 2013 % Change 2013 % Change
Revenue:
Broadcast advertising $ 287,636 $ 248,523 15.7% $ 300,095 (4.2)%
Digital advertising 12,632 5,379 134.8% 5,963 111.8%
Political advertising 4,341 1,258 245.1% 1,394 211.4%
License fees & other 9,276 7,375 25.8% 6,516 42.4%
Net revenue (2) $ 313,885 $ 262,535 19.6% $ 313,968 —%
Adjusted EBITDA (3) $ 79,837 $ 89,909 (11.2)% $ 97,535 (18.1)%
Nine Months Ended September 30,
Actual Pro Forma (1)
2014 2013 % Change 2013 % Change
Revenue:
Broadcast advertising $ 859,090 $ 711,999 20.7% $ 876,819 (2.0)%
Digital advertising 35,203 15,730 123.8% 17,583 100.2%
Political advertising 10,298 3,216 220.2% 3,471 196.7%
License fees & other 29,585 19,735 49.7% 19,578 51.1%
Net revenue (2) $ 934,176 $ 750,680 24.4% $ 917,451 1.8%
Adjusted EBITDA (3) $ 239,106 $ 246,393 (3.0)% $ 266,941 (10.4)%
Selected Balance Sheet information:
As of
September 30,
2014
December 31,
2013
% Change
Cash and cash equivalents $ 26,757 $ 32,792 (18.4)%
Term loans $ 1,953,875 $ 2,025,000 (3.5)%
7.75% Senior Notes 610,000 610,000 —%
Secured loan 25,000 (100.0)%
Total debt $ 2,563,875 $ 2,660,000 (3.6)%
(1) Pro forma information assumes that the acquisition of WestwoodOne, Inc. ("WestwoodOne"), which was completed in December 2013 (the "WestwoodOne Acquisition"), and the sale to Townsquare Media, LLC ("Townsquare") of 53 radio stations in 12 small and mid-sized markets and the swap of 15 radio stations in two small and mid-sized markets with Townsquare in exchange for five radio stations in Fresno, California, which was completed in November 2013 (the "2013 Townsquare Transaction"), both occurred as of January 1, 2013.
(2) Net revenue consists of gross revenue less agency commissions, third party producer revenue shares and other direct costs.
(3) Adjusted EBITDA is not a financial measure calculated or presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). For additional information, see "Non-GAAP Financial Measure and Definition" and "Reconciliation of Non-GAAP Financial Measure to Most Directly Comparable GAAP Measure" included herein.

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:

Three Months Ended September 30,
Actual Pro Forma
2014 2013 2013
Revenue:
Broadcast advertising 91.6% 94.7% 95.6%
Digital advertising 4.0% 2.0% 1.9%
Political advertising 1.4% 0.5% 0.4%
License fees & other 3.0% 2.8% 2.1%
Net revenue 100.0% 100.0% 100.0%

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.

Three Months Ended September 30,
Actual Pro Forma
2014 2013 % Change 2013 % Change
Content costs $ 106,574 $ 65,559 62.6% $ 92,108 15.7%
The following table presents our content costs as a percentage of total net revenues:
Three Months Ended September 30,
Actual Pro Forma
2014 2013 2013
Content costs 34.0% 25.0% 29.3%

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.

Three Months Ended September 30,
Actual Pro Forma
2014 2013 % Change 2013 % Change
Other direct operating expenses $ 119,864 $ 99,202 20.8% $ 114,925 4.3%

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.

Three Months Ended September 30,
Actual Pro Forma
2014 2013 % Change 2013 % Change
Corporate expenses $ 14,756 $ 11,757 25.5% $ 13,429 9.9%

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.

CUMULUS MEDIA INC.
Unaudited Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
Three months ended September 30, Nine months ended September 30,
Actual Pro Forma Actual Pro Forma
2014 2013 2013 2014 2013 2013
Revenue:
Broadcast advertising $ 287,636 $ 248,523 $ 300,095 $ 859,090 $ 711,999 $ 876,819
Digital advertising 12,632 5,379 5,963 35,203 15,730 17,583
Political advertising 4,341 1,258 1,394 10,298 3,216 3,471
License fees and other 9,276 7,375 6,516 29,585 19,735 19,578
Net revenue 313,885 262,535 313,968 934,176 750,680 917,451
Operating expenses:
Content costs 106,574 65,559 92,108 316,868 189,765 280,813
Other direct operating expenses 119,864 99,202 114,925 353,588 292,576 341,730
Depreciation and amortization 29,143 27,614 32,949 87,095 82,814 98,821
LMA fees 2,021 609 609 5,226 2,293 2,293
Corporate expenses (including stock-based compensation expense of $4,399, $2,259, $2,712, $12,645, $7,393 and $11,794, respectively) 14,756 11,757 13,429 53,215 33,517 50,705
Gain on sale of assets or stations (373) (5,198) (5,198) (1,271) (3,662) (3,662)
Loss (gain) on derivative instrument 172 172 (2,672) (2,672)
Total operating expenses 271,985 199,715 248,994 814,721 594,631 768,028
Operating income 41,900 62,820 64,974 119,455 156,049 149,423
Non-operating (expense) income:
Interest expense (36,647) (45,502) (45,674) (109,380) (134,221) (134,393)
Interest income 352 308 480 1,024 942 1,114
Loss on early extinguishment of debt (4,539) (4,539)
Other income (expense), net 443 (139) (139) 3,972 (247) (245)
Total non-operating expense, net (35,852) (45,333) (45,333) (104,384) (138,065) (138,063)
Income from continuing operations before income taxes 6,048 17,487 19,641 15,071 17,984 11,360
Income tax expense (3,508) (6,995) (14,732) (6,663) (19,043) (30,792)
Income (loss) from continuing operations 2,540 10,492 4,909 8,408 (1,059) (19,432)
(Loss) income from discontinued operations, net of taxes (3,455) 26,207
Net income (loss) $ 2,540 $ 7,037 $ 4,909 $ 8,408 $ 25,148 $ (19,432)
Basic and diluted income (loss) per common share:
Basic: Income (loss) from continuing operations per share $ 0.01 $ 0.03 $ 0.04 $ (0.07)
(Loss) income from discontinued operations per share $ — $ (0.02) $ — $ 0.15
Income per share $ 0.01 $ 0.01 $ 0.04 $ 0.08
Diluted: Income (loss) from continuing operations per share $ 0.01 $ 0.03 $ 0.04 $ (0.07)
(Loss) income from discontinued operations per share $ — $ (0.02) $ — $ 0.15
Income per share $ 0.01 $ 0.01 $ 0.04 $ 0.08
Weighted average basic common shares outstanding 231,885,444 179,669,739 224,074,622 176,994,583
Weighted average diluted common shares outstanding 233,222,153 183,131,260 227,802,636 180,032,349

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):

Three Months Ended September 30,
Actual Pro Forma
2014 2013 2013
Net income $ 2,540 $ 7,037 $ 4,909
Income tax expense 3,508 6,995 14,732
Non-operating expenses, including interest expense 35,852 45,333 45,333
LMA fees 2,021 609 609
Depreciation and amortization 29,143 27,614 32,949
Stock-based compensation expense 4,399 2,259 2,712
Gain on sale of assets or stations (373) (5,198) (5,198)
Loss on derivative instrument 172 172
Acquisition-related and restructuring costs 2,773 1,457 1,141
Franchise and state taxes (26) 176 176
Discontinued operations:
Loss from discontinued operations, net of tax 3,455
Adjusted EBITDA $ 79,837 $ 89,909 $ 97,535
Nine Months Ended September 30,
Actual Pro Forma
2014 2013 2013
Net income (loss) $ 8,408 $ 25,148 $ (19,432)
Income tax expense 6,663 19,043 30,792
Non-operating expenses, including interest expense 104,384 138,065 138,063
LMA fees 5,226 2,293 2,293
Depreciation and amortization 87,095 82,814 98,821
Stock-based compensation expense 12,645 7,393 11,794
Gain on sale of assets or stations (1,271) (3,662) (3,662)
Gain on derivative instrument (2,672) (2,672)
Acquisition-related and restructuring costs 15,434 3,652 10,415
Franchise and state taxes 522 526 529
Discontinued operations:
Income from discontinued operations, net of tax (26,207)
Adjusted EBITDA $ 239,106 $ 246,393 $ 266,941

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.

CUMULUS MEDIA INC.
Pro Forma Condensed Consolidated Statements of Operations
(Dollars in thousands)
(Unaudited)


Q1


Q2


Q3


Q4
Year Ended
December 31,
2013
Revenue:
Broadcast advertising $ 269,547 $ 307,177 $ 300,095 $ 313,265 $ 1,190,084
Digital advertising 5,125 6,495 5,963 7,136 24,719
Political advertising 891 1,186 1,394 1,507 4,978
License fees & other 5,972 7,090 6,516 6,356 25,934
Net revenues 281,535 321,948 313,968 328,264 1,245,715
Operating expenses:
Content costs 101,802 86,902 92,108 108,495 389,307
Other direct operating expenses 110,916 115,890 114,925 121,868 463,599
Depreciation and amortization 32,932 32,940 32,949 34,060 132,881
LMA fees 946 738 609 1,423 3,716
Corporate expenses (including stock-based compensation expense) 21,330 15,946 13,429 22,686 73,391
Loss (gain) on asset or station sale 1,309 227 (5,198) (23) (3,685)
Realized (gain) loss on derivative instrument (738) (2,106) 172 820 (1,852)
Total operating expenses 268,497 250,537 248,994 289,329 1,057,357
Operating income 13,038 71,411 64,974 38,935 188,358
Non-operating (expense) income:
Interest expense (44,522) (44,197) (45,674) (44,054) (178,447)
Interest income 270 364 480 352 1,466
Loss on early extinguishment of debt (4,539) (30,395) (34,934)
Other income (expense), net 287 (393) (139) (57) (302)
Total non-operating expense, net (43,965) (48,765) (45,333) (74,154) (212,217)
(Loss) income from continuing operations before income taxes (30,927) 22,646 19,641 (35,219) (23,859)
Income tax benefit (expense) 3,425 (19,485) (14,732) 122,761 91,969
Pro forma net (loss) income $ (27,502) $ 3,161 $ 4,909 $ 87,542 $ 68,110

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):



Q1


Q2


Q3


Q4
Year Ended
December 31,
2013
Pro forma net (loss) income $ (27,502) $ 3,161 $ 4,909 $ 87,542 $ 68,110
Income tax (benefit) expense (3,425) 19,485 14,732 (122,761) (91,969)
Non-operating expenses, including net interest expense 43,965 48,765 45,333 74,154 212,217
LMA fees 946 738 609 1,423 3,716
Depreciation and amortization 32,932 32,940 32,949 34,060 132,881
Stock-based compensation expense 4,761 4,321 2,712 3,766 15,560
Loss (gain) on asset or station sale 1,309 227 (5,198) (23) (3,685)
(Gain) loss on derivative instrument (738) (2,106) 172 820 (1,852)
Acquisition-related and restructuring costs 6,117 3,157 1,141 16,822 27,237
Franchise and state taxes 177 176 176 613 1,142
Pro forma Adjusted EBITDA $ 58,542 $ 110,864 $ 97,535 $ 96,416 $ 363,357

CONTACT: Cumulus Media Inc. J.P. Hannan Senior Vice President, Treasurer and Chief Financial Officer 404-260-6600 jp.hannan@cumulus.com

Source:Cumulus Media Inc.