Cumulus Media (CMLS) 8-K Cumulus Reports Operating Results for Third Quarter 2014

Exhibit 99.1

CUMULUS MEDIA INC.

Cumulus Reports Operating Results for Third Quarter 2014

ATLANTA, GA — November 10, 2014: 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. (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

For further information, please contact:

Cumulus Media Inc.

J.P. Hannan

Senior Vice President, Treasurer and Chief Financial Officer

404-260-6600

jp.hannan@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