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Edited Transcript of CMLS earnings conference call or presentation 8-Aug-19 12:30pm GMT

Q2 2019 Cumulus Media Inc Earnings Call

ATLANTA Aug 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Cumulus Media Inc earnings conference call or presentation Thursday, August 8, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Collin Jones

Cumulus Media Inc. - Former SVP of Corporate Development & Strategy

* John F. Abbot

Cumulus Media Inc. - Executive VP, Treasurer & CFO

* Mary G. Berner

Cumulus Media Inc. - President, CEO & Director

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Conference Call Participants

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* Aaron Lee Watts

Deutsche Bank AG, Research Division - Research Analyst

* Marci Lynn Ryvicker

Wolfe Research, LLC - MD of Equity Research

* Michael A. Kupinski

NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst

* Zachary Alan Silver

B. Riley FBR, Inc., Research Division - Associate

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Presentation

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Operator [1]

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Welcome to the Cumulus Media Quarterly Earnings Conference Call. I'll now turn it over to Mr. Collin Jones, Senior Vice President of Corporate Development and Strategy. Sir, you may proceed.

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Collin Jones, Cumulus Media Inc. - Former SVP of Corporate Development & Strategy [2]

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Thank you, operator. Welcome, everyone, to our second quarter 2019 earnings conference call. I'm joined today by our President and CEO, Mary Berner; and our CFO, John Abbot.

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. A full description of these risks as well as financial reconciliations to non-GAAP terms can be found in our SEC filings, including our press release and Form 10-Q, which were filed earlier this morning.

A recording of today's call will be available for about a month and details for how to access that replay and our SEC filings can be found on our website.

With that, Mary, I'll turn it over to you.

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [3]

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Thanks, Collin, and good morning, everyone. As you know, we've been pretty active on the transaction front since we last spoke. But cutting through all the M&A noise, we're pleased to be reporting another solid quarter.

On an ex political same-station basis, revenue in the quarter was up 1.8%, and EBITDA was up 3.7%, driven primarily by strength in digital, national and network revenue channels. Unadjusted for political revenue was up 0.7% and EBITDA declined by about 1 point. Our results reflected our focus on the financial goals and our strategic priorities we established when we emerged from bankruptcy and which continue to drive us today. These include: Reducing leverage to below 4x; optimizing the portfolio to support deleveraging and enhanced competitive positioning; executing a multi-pronged profitable and high-growth digital strategy; and enhancing operating performance through numerous initiatives, including yield management, inventory optimization and cost reduction strategies.

Since our last earnings call, we've been very active in paying down debt with M&A proceeds and internally generated free cash flow. In June and July alone, we prepaid $165 million of our term loan, bringing our total debt prepayment in the first full year post bankruptcy to approximately $250 million, a nearly 20% reduction in our debt.

As of 6/30, net leverage has moved down to approximately 4.8x, a full turn of decline in a year. Also in the quarter, we responded to attractive opportunity in the capital markets to issue senior secured bonds whose proceeds we used to repay some of our remaining term loan.

The recent debt payments -- prepayments were funded in large part through our M&A activity. Since our last call, we have closed all 4 previously announced portfolio optimization transactions. Two of those were swaps with no exchange of cash. However, the sale of 6 stations to Educational Media Foundation and the sale of KLOS in L.A. to Meruelo Media together generated $146.5 million in gross proceeds.

Also, we recently announced an agreement with Red Apple Media for it to acquire our New York station WABC-AM for $12.5 million. And when that transaction closes, we'll use the net cash proceeds to pay down debt as well.

Our swaps with Entercom and Connoisseur Media were designed to meaningfully strengthen our positions in 2 key markets, Indianapolis and Allentown. In our first quarter of operating with the new stations, both markets grew EBITDA versus prior year, with expense synergies, in particular, outpacing our expectations. We've also seen good traction on the rating side for both clusters. In Indi, we owned a station that was a direct format competitor to one of the stations that was acquired. After consolidating the cluster, we changed formats of that legacy station, WYRG-FM from CHR to Rock to resolve this head-to-head battle. And in the first month, the station, under its new format, went from a 1.7 share to a 4.8 share, and our total Indianapolis cluster now claims a significant share of market.

And in Allentown, our newly acquired WODE-FM just posted a #1 spring book, which we expect will give us a nice trajectory into the back half of the year.

Moving to our top line results. Our multi-pronged digital strategy continues to meaningfully outperform the industry and is helping to offset weakness in local spot revenue. In Q2, our combined digital businesses grew 69% year-over-year, reflecting strong execution and new product innovation. In just the last year, the tremendous digital growth we've experienced has taken digital from below 5% of our total revenue in Q2 2018 to more than 7% of the total revenue this quarter. And most importantly, in each of the last 4 quarters, we have enjoyed solid profit margins.

To give you a little insight into what is fueling that digital performance. First, our highest margin digital business, streaming, grew 30% in the quarter. That growth is coming in part through new distribution channels. We previously announced a deal with TuneIn, and now we're the home of the largest audio network of custom skills for Alexa and Google Home with 365 stations and 17 nationally syndicated shows now accessible through voice-activated technology, providing us with new monetization opportunities.

Recently, for example, we were able to leverage this unique network to sell an exclusive sponsorship of all Alexa and Google Home skill to the job search site, Indeed. We've also made recent capital investments in both hardware and software across the streaming platform to enhance sound quality and to improve our ability to deliver content and spot loads in the stream, which differ from the over-the-air broadcast.

Our local digital marketing services platform, which we refer to as our C-suite of products, is our next highest margin digital products. And C-Suite revenue was up 77% in the quarter. A key driver of growth here is our focus on attachment rates, which are up over 30% in the last 6 months. Nearly 10% or over 1,000 local direct and agency accounts are now buying a C-suite product on an average -- on average each month. We've evolved our local sales force through training and new hires to better package digital with radio. In support of that transition, we now have 60 digital sales managers, managers up from just 17 2 years ago, and we've armed them with innovative solutions like the EPiC Guarantee, which is the industry's first integrated local radio and digital lead guarantee program, and new data attribution capabilities backed by partnerships that leaves RX and Veritone, both leaders in that space.

And finally, our podcasting business, up 139% in Q2 and is now a meaningful contributor to the company's top and bottom line. Monthly downloads are up to 67 million, nearly double what we had a year ago. And as I mentioned on the last call, we hired John Wordock, who ran the Wall Street Journal's podcast business to head up podcast content development and acquisition. And under John, we continue to build up our content offerings.

For example, we recently commenced a podcast partnership with global YouTube and publishing sensation, psychologist Jordan Peterson, who has sold 3 million books in 50 languages and has amassed nearly 150 million YouTube views. Downloads of his top-ranking podcasts are up 30% quarter-to-quarter. We also announced that we will be the exclusive sales partner for the female-targeted soon-to-be-launched Lemonada network, a podcast content company, who's co-founder was the executive producer of Pod Save the People, and have entered into a partnership with eSports and gaming platform, Subnation, which includes a new podcast called The Voice of Esports and a syndicated broadcast element as well. So a lot of positive momentum. And importantly, we've been able to build this business from scratch with a healthy profit margin that is actually in excess of that of some of our core business lines.

While investing in our digital initiatives remains key to our strategy, we've also been enhancing our operating performance in the core business. In these areas, improvement sometimes requires more transformative approaches to how we do business. For example, the massive systems changes and organizational development over the last 2 years that have resulted in a sea change in our ability to maximize the value of our inventory. We are largely finished with the rollout of the pricing and inventory systems that have been highlighted on previous calls. These systems, people and process investments we have made in revenue management have given us the critical ability to look at all of our inventory as one big pool, allowing us to match supply with the demand that delivers the most EBITDA to the company, regardless of sales channel.

Now that we are finally able to track at scale our pricing and sell-out trends, we can manage the business in view of those trends and better project inventory needs and availability in advance, which has not only helped drive margin and sell-out across the board, but has also allowed us to develop and sell new revenue opportunities. For example, in this quarter alone, we generated nearly $4 million of opportunistic revenue that we can track directly from bespoke national and network advertising vehicles that we created with a degree of precision we simply could not achieve before the new systems.

Many advertisers are looking for tailored solutions, and overall market dynamics can shift relatively quickly. So the ability to view all of our inventory as 1 pool with granular knowledge of all elements of that pool is not only a huge new benefit for us, it's a strategic imperative.

Along with the investments that we have made in our revenue management capabilities and in digital, we continue to be relentlessly focused on cost management. Our expense increases this quarter were entirely driven by variable cost increases associated with higher revenue in digital, national and network. Absent those increases, active cost reductions essentially offset inflationary expense pressures otherwise baked into our cost profile. While the low-hanging fruit in cost savings has been realized at this stage, we continue to focus on cost reduction strategies daily, including through reengineering business practices and leveraging technology where possible to gain efficiencies.

For example, we're in the process of centralizing our traffic function to oversee all spot advertising trafficking, consolidating a function previously distributed across 90 different locations down to 3 hubs. When completed in November, this effort will decrease overall cost and is expected to improve the effectiveness of a traffic function. Similarly, we started to work on -- we've already started to work on consolidating our network technical support operations from 2 facilities into 1 and have already consolidated our music content management system from multiple technology platforms to 1 consistent uniform platform. We view these types of projects as critical to free up dollars for investment in high-growth areas that better position the company long term.

Looking ahead, pacing in the third quarter is slightly negative, ex political. Political is about a 50 basis point headwind at this stage. Local spot revenue continues to be a source of weakness. And currently, network revenue is also taking pacing down, though that business tends to be lumpy from a pacing standpoint. Digital revenue, across all 3 strategies, is pacing up nicely as is national spot.

As I mentioned at the onset, our consistently strong performance is a result of execution against our strategic priorities and financial goals. At the same time, we are deliberately transforming Cumulus Media from a traditional broadcast radio business to a true audio-first media and entertainment company, a platform that provides premium content to consumers while providing advertisers with local impact and national reach, not just on air, but through digital, mobile, voice-activated media solutions and integrated digital marketing services.

So with that, I'll turn the call over to John for additional financial update. John?

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [4]

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Thank you, Mary. I'll give some more color on our financial results before covering a few additional items related to cash flow, debt and M&A. Also, given the number of deals we've closed, M&A activity had a significant impact on our as-reported results this quarter. So for the sake of comparability, I'll speak to our financials on a same-station basis, adjusting last year's and this year's numbers for all of the M&A transactions that we've completed. I would note though that our numbers are not adjusted for the announced sale of WABC to Red Apple Media, which we expect to close in the latter part of this year.

Additionally, as we've noted this quarter and in previous quarters, the boundaries between our historically reported segments have become less and less relevant. With the enhanced insight that we have in the inventory availability and pricing, we now move inventory among sales channels to optimize revenue. More than ever, we're managing the business as an integrated whole, and we expect to see significant benefit in operating this way going forward. With that in mind, I'll spend a few minutes on our financial results for the quarter on a consolidated same-station basis.

Total revenue for the quarter, excluding political, was up $4.8 million or 1.8%. We saw strength in network, which was up nearly 4%. National spot, which was up double digits in the quarter and digital, which was up 69% in the quarter, as Mary previously mentioned. Our strength in both national and network was supported by the revenue management initiatives that are continuing to gain traction, while our digital performance was driven by strong execution on all 3 strategies. These positive drivers were partially offset by a continuation of market-driven challenges, depressing local spot revenue performance. Including the impact of political, total revenue was up $1.8 million or 0.7% from Q2 of 2018. We were up against a political comparison of about $3.8 million in revenue last year, and we did about $800,000 of political this year.

Moving down the P&L. Total expenses were up in the quarter by $2.4 million or 1.1%. The net expense increase in the quarter was entirely driven by higher variable cost on digital revenue increases and the other growing revenue streams. As you may remember, in Q2 of 2018, we were hit by a one-time write-off related to the shutdown of the United States traffic network. However, this quarter was impacted by several other onetime items that more than offset the USTN impact from last year. So in total, one-time items did not affect the quarter.

EBITDA for the quarter on a same-station basis and excluding political, was up $2.2 million or 3.7%. Without normalizing for political, EBITDA came in at $61.5 million, a decline of $500,000 or 0.9% year-over-year. We recognize that modeling for the rest of the year may get a little bit complicated because of our M&A activity. So to help with that effort, we wanted to share with you what the 2018 M&A adjusted revenue numbers for Q3 and Q4 are. And for Q3, the number is $272.2 million; Q4, $298.6 million, and those numbers reflect the same announced transactions for which we adjusted the Q2 numbers. And then for EBITDA, Q3 and Q4 2018 adjusted prior period numbers are $59.2 million and $62.3 million, respectively.

Additionally, since political is such a big factor in the next 2 quarters, we thought it would be helpful to note that in Q3 last year, we had $3.6 million of political revenue. And in Q4 last year, we had $11.3 million of political revenue.

Moving off the P&L in Q2 this year. We spent about $5.6 million on CapEx, and we expect to spend about $25 million of CapEx for the full year.

Turning to the balance sheet. We've been very active since we last spoke, taking advantage of good market conditions to refinance a portion of the term loan and also making prepayments to reduce our total debt. Following the closing of our sale of 6 stations to Educational Media Foundation for gross proceeds of $103.5 million on May 31, we completed a $115 million voluntary prepayment of the term loan using the net proceeds from that sale and cash on hand from operations.

In mid-June, we opportunistically issued new senior secured first lien notes. The offering was well received, allowing us to upsize the deal with $500 million and priced at 6.75%. The new notes have a maturity of July 1, 2026, which considerably derisks our balance sheet, and we were also able to achieve more flexible terms on the bonds than we had in our exit term loan. We used the net proceeds of $492.7 million from the notes to prepay nearly half of the remaining term loan at par.

Finally, we completed the sale of KLOS-FM to Meruelo Media on July 15 for gross proceeds of $43 million, and we used the net proceeds from that sales, plus cash on hand from operations, to make a $50 million voluntary prepayment on the term loan. Collectively, we have now reduced our debt by approximately $250 million in the year since we emerged from bankruptcy.

Net leverage as of 6/30 was 4.8x. And after July's $50 million prepayment, net leverage was further reduced to approximately 4.6x.

The last item to note on the M&A front is the D.C. land sale. As we've discussed on previous calls, the development plans of our buyer, Toll Brothers, have faced and continued to face opposition from community organizations, appealing approvals that Toll has received to date. There was some positive progress this quarter, and that one of those appeals was dismissed, which we believe has increased the likelihood of, and potentially decrease the time to, achieve a positive outcome for this transaction. We continue to be in discussions with Toll Brothers and remain optimistic that we'll be able to reach a new agreement that's attractive to both parties. We still view this property as a valuable asset that can be sold to raise cash and pay down debt, and we'll keep you updated on our progress as we have more to share.

Finally, I'd like to give a brief update on the status of the petition for declaratory ruling that we filed with the SEC. Our current equity structure, of course, consist of Class A and B shares and Series 1 and 2 warrants, which was crafted to comply with the rules that limit foreign ownership to 25%. However, to simplify the structure and accelerate conversions of warrants on a Class A shares that trade on NASDAQ, we filed a petition for declaratory ruling about a year ago to allow higher foreign ownership in our stock than permitted under the rule. Grant of our request involves not only the approval of the SEC, but also the review of a group of representatives from the executive branch, named Team Telecom. The SEC issued a public notice on this petition on May 21, 2019, and the Team Telecom review was commenced shortly thereafter. No party other than Team Telecom has filed comments with respect to the petition, and the period for filing comments is closed. We're now going through the process of responding to Team Telecom's data requests and questions. At this stage, we don't have an updated view on the time line for a definitive response beyond what we've said historically, which is that a reasonable expectation is for a response to our request to be received by the end of 2019.

At this point, we'd like to open up the line for Q&A. Operator, we are ready for the first question.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Marci Ryvicker.

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Marci Lynn Ryvicker, Wolfe Research, LLC - MD of Equity Research [2]

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I had a quick question. You guys mentioned that Q3 pacings are slightly negative. Is this on an as-reported basis? Or a same station? And I was wondering if you guys could give some color on how your ad categories are trending?

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [3]

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Yes, sure. That is on a same-station basis. So that's -- we're looking at that adjusted for the transactions as well.

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [4]

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Yes, I can address the categories. Our stronger categories this quarter were telecom and media, financial and travel. And the weaker category -- weakest categories were entertainment, home products and automotive.

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Marci Lynn Ryvicker, Wolfe Research, LLC - MD of Equity Research [5]

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Got it. And one last one. Entercom announced that it's acquiring 2 podcast companies yesterday, and I know there's a lot of growth in this space, but it feels increasingly crowded. Just wanted your thoughts on your strategy there and how you guys plan on differentiating yourselves.

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [6]

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Yes, I think the purchase speaks to the opportunity in the market. And while we are always mindful and sensitive to new competition. We've -- as we said and shown, we've grown nicely organically, and we still see a great deal of runway in that growth.

With regard to our success to date, we see that as driven by good execution. And we do have -- so we think some core strengths, an experienced network sales organization with deep relationships and a track record of strong monetization. We have the second largest promotional platform after iHeart with 250 million listeners, which we use and are using to promote podcasting. And we have an internal content development arm with the -- which I mentioned in my prepared remarks, which were -- we've built up and a proven ability to identify and partner with third-party content creators. So I think there's runway in our growth.

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Marci Lynn Ryvicker, Wolfe Research, LLC - MD of Equity Research [7]

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Got it. And where do you guys expect net leverage to be at the end of the year?

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [8]

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Yes. I don't know that we have a forecast for that. I mean a couple of things to keep in mind. One, once we lap Q4 last year, which is the big political quarter, the LTM, if you're looking at leverage based on LTM EBITDA, the LTM EBITDA will drop down because of that. But I mean we don't have a particular number that we're putting out. I think factor that in and the fact that we'll continue to generate free cash flow should close on the WABC deal and continue paying down debt.

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Operator [9]

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Your next question comes from the line of Michael Kupinski.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [10]

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Just a couple of questions. I was wondering if there was any particular regions that are seeing better or softer advertising results than maybe the general corporate trends?

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [11]

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Yes. The -- we operate in 87 markets. So the general corporate trend is the result of inputs from many, many markets, many are up, many are down. So no particular regional trend.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [12]

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Nothing that's just standing out that are particularly weak or particularly strong?

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [13]

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No, not recently.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [14]

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Okay. And then can you just talk a little bit about ratings trends, maybe for booked versus diaries, your diary markets, how things are trending there?

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [15]

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Sure. We have gained back most of the share that was lost from 2012 to 2015, and we're now back up near those levels. So I would say our challenge at this point is really about maintaining our share and picking our battles where our ratings have the biggest impact. As we announced at the last earnings call, we've have a new credit programming in the seat, he's been in for a couple of months, he was in the radio business for the earlier part of career -- in his career, but he joins from Viacom. And he's taking it at this stage. What's he's focused on is trying to accelerate the areas where we're seeing good progress and to address our problem children. And as again, when you have over 400 stations, there's always pockets of strength and always problem children.

But speaking generally, I'd say, we've seen some choppiness recently in some large market cases. It seems to be caused by -- at least a contributing factor would be some issues with Nielsen's measurement mechanism and methodology. But in general, our news talk platform -- new talk platform, in aggregate, is gaining momentum, which is a boost heading into the election cycle next year. I'd say sports probably remains our biggest challenge right now on the local side. However, sports has been trending nicely for us on the network side at Westwood One. So I think that's pretty much it.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [16]

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Got you. And then can you talk a little bit about your advertising guarantees initiative and how that's going, if that program is ongoing at this point.

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [17]

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Yes. Yes, it's ongoing. EPiC Guarantee is a local attribution product and it guarantees qualified leads and the Westwood One ROI Guarantee is a network attribution product and it measures campaign impact. We rolled out EPiC in home services, financial, medical and legal, and next in the queue are events in auto and retail services. And I would characterize it as many direct sales of the product and exponentially more. I mean hundreds and hundreds of sales attributed to using it as a door opener.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [18]

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Got you. And...

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [19]

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The way we look at it -- sorry, go ahead.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [20]

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I was just going to ask it that if you're -- if you're seeing traction with advertisers that, that is actually helping you really gain more advertisers? I mean any additional color that you can give there.

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [21]

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Yes. I mean it's a unique go-to-market strategy and that -- it gives local sellers a very simple and distinct advantage versus other local sellers, radio, broadcast radio and others.

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Operator [22]

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Your next question comes from the line of Zack Silver.

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Zachary Alan Silver, B. Riley FBR, Inc., Research Division - Associate [23]

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Just first, on the network pacing down, you mentioned lumpiness there. And I guess this has been a mid-single-digit kind of grower for you. And just to get a little more granularity around the trend so far quarter-to-date and whether you expect that this is sort of the new trend going forward, if we can still see mid-single-digit growth in network?

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [24]

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Yes. No, totally fair question. And that's why we highlight that network is lumpy because we really have in the past seen that pacing bounce around in pretty meaningful swings. And so it's fairly early in the quarter. I don't think we're concerned at this stage that it's by any means a trend, and we feel good about the demand on the network side. And so -- but we wanted to be transparent with what we're seeing today.

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Zachary Alan Silver, B. Riley FBR, Inc., Research Division - Associate [25]

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Got it. That's helpful. And then, I guess, in terms of the portfolio optimization. You talked some about what you've done, but I guess, how is the pipeline looking for additional portfolio optimization transactions over the back half and into next year? And what is the appetite for M&A, either through actual acquisitions and divestitures and also for swaps?

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [26]

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Sure. I'll try to speak to that, obviously, difficult to speak to anything specifically. But -- so maybe what I would highlight is we would hope that you would all agree that one hallmark of everything we've done so far on the portfolio optimization side is that we've been very, very rigorously analytical about it. And that's the approach we're going to continue to take and be an opportunistic. And so as we see opportunities, whether it's like in Allentown and Indi to build stronger clusters, and we have an ability to pursue those, we'll do that. If we have opportunities where we have -- it's difficult for us to gain a strong competitive position, a leading competitive position in the market, and we have an opportunity to monetize those assets at a very attractive, accretive way, we'll pursue those. So a lot of it depends on the opportunities that present themselves. And so I think the couple of things that we're most mindful of is putting ourselves in a position to be flexible to do that and pursue those. And secondly, to just be, as I said, rigorously analytical as we evaluate any opportunity.

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Zachary Alan Silver, B. Riley FBR, Inc., Research Division - Associate [27]

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Great. And then, I guess, one more, if I could. Just in terms of your smaller markets versus larger markets, can you give us any sense of how advertising trends have been year-to-date between those 2 groups?

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [28]

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Yes, it's an interesting question that we hear a lot. And surprisingly, there's no real distinction that we can see. We had a good mix of large, medium and smaller markets. And we had some great performers across the board. And as Mary said, we have problem children across the board. The market size, surprisingly, does not really drive sort of our ability to deliver, whether it's growth or high margins. It's really more execution and market-specific dynamics.

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Operator [29]

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Your next question comes from the line of Aaron Watts.

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Aaron Lee Watts, Deutsche Bank AG, Research Division - Research Analyst [30]

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Couple of questions. One, just broader on the advertising environment, a little bit of a deceleration from 2Q to 3Q. Anything you would call out in terms of big advertisers that pulled back a little bit or general themes throughout that are causing that? And any reason for optimism that you could see a little bit of a bounce back as we reach the back end of the year.

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [31]

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I think it's pretty much the same story quarter-to-quarter at this point in the quarter, which is that we continue to see strength in national spot. As John mentioned, there is still network demand, pacing aside. And local spot continues to be very, very weak. Our focus, of course, is offsetting that with our positive revenue streams. In our case, that's digital, which is tracking very, very nicely.

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [32]

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And obviously, national historically...

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [33]

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And national, yes...

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [34]

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Network as well. So we continue to shrink there. I mean there are always individual advertisers that are sort of in and out. I mean that some of the horrific tragedies here recently have led to some pullback by certain advertisers like Walmart...

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [35]

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Walmart, right...

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [36]

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For example. But I don't think we're seeing any particular trends that we would call out on the broad -- at the front.

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Aaron Lee Watts, Deutsche Bank AG, Research Division - Research Analyst [37]

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Okay. Got it. And then a quick one on podcasting because I know there was a lot of buzz on it now. And I'm just curious have advertisers -- has the demand come in for podcasting in a big way yet? And as that money comes in, are you finding a specific request for podcast buys? Or does it -- is it more a cross-sell for you as you sell some of your spot ads and offer that as an add-on?

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [38]

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There's a specific demand for podcasting. And I would say where there is growing demand is for female-targeted podcasts. Most -- the majority of podcasts or the reach is currently against men. And so which is why our partnership with Lemonada, which is specifically targeted to females is important. What's happened is it's evolving very, very quickly from direct marketers to brand advertising. And we do see a considerable amount of demand. so far, since starting with podcasting, but there is also an ask for add ons as well. It's really across the board.

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Aaron Lee Watts, Deutsche Bank AG, Research Division - Research Analyst [39]

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Okay. And to somewhat attach that, and I understand it's early days, but are the podcast buy sort of incremental dollars from those advertisers that maybe are existing advertisers of yours? Or is it sort of taking away from one pod that's coming into you and putting into the podcast spot?

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [40]

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It makes sense for the advertiser, but I would say, in general, it's incremental revenue.

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Aaron Lee Watts, Deutsche Bank AG, Research Division - Research Analyst [41]

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Okay. Great. One last one from me. And again, I appreciate the time. As I think about you pairing or optimizing your station portfolio, will that have any impact on your network business?

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John F. Abbot, Cumulus Media Inc. - Executive VP, Treasurer & CFO [42]

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Yes. I mean it's a great question. And we're very mindful of that. I mean I think we feel very good about the broad reach that we enjoy right now, and which is an important element of the network's position in the ad marketplace, and certainly nothing -- none of the activity to date has had any kind of negative impact on that. And I guess I would just say we're mindful of it, and that gets factored into any decision we would make on that front.

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [43]

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And also, when we did these -- when we did this, we evaluate them quite carefully, and the impact was pretty small. And I think I would want to make this note that even after all the M&A, we continue to have massive scale. If we combine the station footprint, 428 stations in 87 markets with the 8,000 affiliates we have for the network for 250 million people we reach each month. But as we said before, which is only slightly behind iHeart. So given that, we think we're really well positioned to continue to compete both on a local level, both the national and the network marketplaces.

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Operator [44]

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At this time, this concludes our live questions. I will now turn it back over to the company.

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Mary G. Berner, Cumulus Media Inc. - President, CEO & Director [45]

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Thank you all for joining us today, and we look forward to speaking with you again soon. Have a great day. Thank you.