Report: Four Stations Seen As 'A Drag' On Cumulus

Only low expectations before the latest earnings report of Cumulus Media kept the company from getting crushed, as its inability to produce ratings in several of its largest markets resulted in EBITDA in the quarter plunging by 18 percent, according to analyst Gary Bourgeault at Seeking Alpha.

Even with the low expectations, Bourgeault says it's surprising to see the company's share price jump after the weak report; presumably because investors, for now, think it will be able to successfully fix the problems going forward.

Revenue was flat in the third quarter, coming in at $313.9 million, with EBITDA plunging to $79.9 million, a decline of 17.7 percent.

This came from the company's inability to secure high-margin ads, and the need to invest in the weak but large stations that were the cause behind it.

The four major markets dragging the company down are Talk WLS 890 AM in Chicago; Rock KLOS 95.5 FM in Los Angeles; HotAC WRQX 107.3 FM in Washington; and HotAC WPLJ 95.5 FM in New York. According to Cumulus management, the plunge in EBITDA for all the company in 2014 will be attributable to the New York and Washington stations. All four stations have seen a change in morning shows during the past year or two.

Lew Dickey

On the positive side, he adds, it looks like all of these stations are starting to improve, and while they'll continue to be a challenge in 2015, it appears the worst is behind them, as much of the damage was done in the first three quarters. The fourth quarter looking better at this time, although it won't make a significant impact until further into 2015.

Bourgeault opines execution has been a problem for Cumulus ever since it acquired Citadel, as it was dealing with scale and the increase in stations resulted in difficulty in properly and effectively managing them. Emerging from that weak execution at some of the stations is volatility in a number of those markets.

To address that, Lew Dickey has taken over day-to-day operations of the company in order to improve "sense of urgency, preparedness and go-to-market strategies for 2015."

The goal in the short term is to bring more consistency and continuity to the performance of the company, as it has been up and down for some time. A lot of that isn't from the increase in competition on the digital and satellite side of the market it competes in.

Dickey says the company should see improvement in the fourth quarter as a result of some of the changes he's made and put in place.