Cumulus Media(CMLS) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Cumulus Media Inc Item 1. Financial Statements (Unaudited) This section presents Cumulus Media Inc.'s unaudited condensed consolidated financial statements and related notes for Q1 2021 and 2020 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at March 31, 2021, and December 31, 2020 Condensed Consolidated Balance Sheet Highlights (Dollars in thousands): | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Total Assets | $1,842,268 | $1,859,738 | | Total Liabilities | $1,465,852 | $1,462,147 | | Total Stockholders' Equity | $376,416 | $397,591 | Condensed Consolidated Statements of Operations This section details the company's financial performance for the three months ended March 31, 2021 and 2020 Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31, Dollars in thousands): | Metric | 2021 | 2020 | | :---------------------------------- | :------- | :------- | | Net Revenue | $201,728 | $227,914 | | Operating (Loss) Income | $(8,579) | $8,259 | | Loss Before Income Taxes | $(26,266) | $(8,900) | | Net Loss | $(21,917) | $(7,351) | | Basic and Diluted Loss Per Share | $(1.07) | $(0.36) | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity for the three months ended March 31, 2021 and 2020 Changes in Stockholders' Equity (Three Months Ended March 31, Dollars in thousands): | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Total Stockholders' Equity (End of Period) | $376,416 | $397,591 | | Net Loss Impact | $(21,917) | $(7,351) | | Stock-based Compensation Expense | $1,057 | $719 | Condensed Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities for Q1 2021 and 2020 Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31, Dollars in thousands): | Cash Flow Activity | 2021 | 2020 | | :---------------------------------- | :------- | :------- | | Net Cash Provided by Operating Activities | $25,946 | $24,216 | | Net Cash (Used in) Provided by Investing Activities | $(2,890) | $8,892 | | Net Cash (Used in) Provided by Financing Activities | $(1,011) | $57,008 | | Increase in Cash and Cash Equivalents | $22,045 | $90,116 | | Cash and Cash Equivalents (End of Period) | $293,806 | $107,123 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies and specific financial statement items Note 1. Nature of Business, Interim Financial Data and Basis of Presentation This note describes Cumulus Media's business, financial statement presentation, COVID-19 impact on estimates, and supplemental cash flow information - Cumulus Media is a leading audio-first media and entertainment company, operating 415 stations across 86 markets, delivering nationally-syndicated programming through Westwood One, and growing its network of original podcasts[28] - The COVID-19 pandemic has made financial estimates and assumptions more difficult to calculate, though there was no material impact to key estimates as of March 31, 2021[30] Supplemental Cash Flow Information (Three Months Ended March 31, Dollars in thousands): | Metric | 2021 | 2020 | | :---------------------------------- | :------- | :------- | | Interest Paid | $8,610 | $7,192 | | Income Taxes Paid (Refunded) | $9 | $(122) | | Trade Revenue | $10,293 | $9,098 | | Trade Expense | $9,534 | $8,081 | - The Company is currently evaluating the impact of adopting ASU 2016-13 (Financial Instruments - Credit Losses), which is effective for Smaller Reporting Companies for fiscal years beginning after December 15, 2022[36] Note 2. Revenues This note details revenue recognition policies, disaggregates revenue by source, and explains trade and barter transactions Revenues Disaggregated by Source (Three Months Ended March 31, Dollars in thousands): | Revenue Source | 2021 | 2020 | | :-------------------------- | :------- | :------- | | Advertising Revenues | $196,436 | $224,540 | | Non-Advertising Revenues | $5,292 | $3,374 | | Total Revenue | $201,728 | $227,914 | - Substantially all revenues are from advertising, primarily broadcast radio advertising time and digital audio network opportunities, with non-advertising revenue being immaterial[40][42] Trade and Barter Transactions (Three Months Ended March 31, Dollars in millions): | Metric | 2021 | 2020 | | :-------------------------- | :------- | :------- | | Trade and Barter Revenues | $10.3 | $9.1 | | Trade and Barter Expenses | $9.5 | $8.1 | Note 3. Intangible Assets This note breaks down intangible assets, including indefinite and definite-lived assets, and discusses impairment testing policies Net Book Value of Intangible Assets (March 31, 2021, Dollars in thousands): | Asset Type | Net Book Value | | :---------------------------------- | :------------- | | FCC Licenses | $824,844 | | Trademarks | $19,755 | | Affiliate and Producer Relationships | $96,515 | | Broadcast Advertising | $13,867 | | Tower Income Contracts | $9,309 | | Other | $0 | | Total Net Book Value | $964,290 | - Amortization expense for intangible assets was $4.932 million for the three months ended March 31, 2021[47] - The Company determined that no triggering event occurred to necessitate interim impairment tests for intangible assets during the three months ended March 31, 2021, despite monitoring COVID-19 related economic conditions[47] Note 4. Long-Term Debt This note details the company's long-term debt structure, including term loans, revolving credit, senior notes, interest rates, and covenant compliance Long-Term Debt, Net (Dollars in thousands): | Debt Instrument | March 31, 2021 | December 31, 2020 | | :---------------------------------- | :------------- | :---------------- | | Term Loan due 2026 | $468,099 | $469,411 | | 6.75% Senior Notes | $452,836 | $452,836 | | 2020 Revolving Credit Facility | $60,000 | $60,000 | | Less: Total Unamortized Debt Issuance Costs | $(8,964) | $(9,336) | | Long-Term Debt, Net | $966,721 | $967,661 | - The Term Loan due 2026 bears interest at LIBOR plus 3.75% (subject to a 1.00% LIBOR floor) or Alternative Base Rate plus 2.75% (subject to a 2.00% floor), with a rate of 4.75% per annum as of March 31, 2021[51] - As of March 31, 2021, $64.3 million was outstanding under the 2020 Revolving Credit Facility (including letters of credit), and the company was in compliance with all required covenants for all debt instruments[58][62] Note 5. Fair Value Measurements This note presents fair value measurements for the Term Loan and Senior Notes, classified within the fair value hierarchy Fair Value of Debt Instruments (Dollars in thousands): | Debt Instrument | March 31, 2021 (Fair Value) | December 31, 2020 (Fair Value) | | :-------------------------- | :-------------------------- | :----------------------------- | | Term Loan due 2026 | $461,078 | $460,023 | | 6.75% Senior Notes | $459,629 | $464,157 | - Fair values were calculated using third-party trading prices: 98.5% for Term Loan due 2026 and 101.5% for 6.75% Senior Notes as of March 31, 2021[63] Note 6. Income Taxes This note details income tax benefit and effective tax rates, explaining differences from the federal statutory rate and deferred tax asset assessment Income Tax Benefit and Effective Tax Rate (Three Months Ended March 31, Dollars in millions): | Metric | 2021 | 2020 | | :-------------------------- | :------- | :------- | | Income Tax Benefit | $4.3 | $1.5 | | Pre-Tax Book Loss | $(26.3) | $(8.9) | | Effective Tax Rate | 16.6% | 17.4% | - Differences between effective tax rates and the 21.0% federal statutory rate are primarily due to state and local income taxes and certain statutory non-deductible expenses[66] - The Company has not recorded a valuation allowance for deferred tax assets as of March 31, 2021, believing they meet the 'more likely than not' recognition standard for recovery[67] Note 7. Stockholders' Equity This note outlines authorized and outstanding common stock, including Class A and B shares, and the expired Shareholder Rights Plan - As of March 31, 2021, the Company had 20,445,622 outstanding shares of common stock, comprising 18,327,716 Class A shares and 2,117,906 Class B shares[71] - The Shareholder Rights Plan, adopted on May 20, 2020, expired with no rights having become exercisable at the close of business on April 30, 2021[72][88] Note 8. Loss Per Share This note details basic and diluted loss per share calculations, explaining the exclusion of anti-dilutive potential common shares Basic and Diluted Loss Per Share (Three Months Ended March 31, Dollars in thousands, except per share data): | Metric | 2021 | 2020 | | :---------------------------------- | :------- | :------- | | Basic Net Loss Attributable to Common Shares | $(21,917) | $(7,351) | | Basic Weighted Average Shares Outstanding | 20,419,450 | 20,225,074 | | Basic Loss Per Share | $(1.07) | $(0.36) | | Diluted Net Loss Attributable to Common Shares | $(21,917) | $(7,351) | | Diluted Weighted Average Shares Outstanding | 20,419,450 | 20,225,074 | | Diluted Loss Per Share | $(1.07) | $(0.36) | - Potential common shares (employee stock options, restricted shares, other stock awards) were excluded from diluted share count for Q1 2021 and Q1 2020 because their effect would have been anti-dilutive due to the net loss[73] Note 9. Commitments and Contingencies This note outlines future contractual commitments and updates on significant legal proceedings, including class action lawsuits and the NCAA dispute - The remaining aggregate obligation under agreements with Nielsen Audio is approximately $82.9 million as of March 31, 2021, expected to be paid through December 2022[76] - The Company is a defendant in a putative class action lawsuit regarding its 401(k) Plan, alleging breach of fiduciary duties. The Company filed a motion to dismiss remaining claims on March 24, 2021, and intends to vigorously defend the case[83][85] - Westwood One and the NCAA filed competing lawsuits concerning the Radio Agreement due to event cancellations in 2020 from COVID-19. While litigation continues, an agreement for the 2020-21 college basketball season has been reached[86] Note 10. Subsequent Events This note discloses significant post-reporting period events, including additional PPP loans and the Shareholder Rights Plan expiration - On April 1, 2021, the Company received an additional $18.3 million in PPP loans, bringing the total to $20 million. These loans have various maturity dates through April 1, 2026, accrue interest at 1.0%, and the Company intends to apply for forgiveness[87][99] - The Shareholder Rights Plan expired on April 30, 2021, without any rights becoming exercisable[88] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, operating results, COVID-19 impact, liquidity, and Adjusted EBITDA reconciliation Overview This section highlights the forward-looking nature of the discussion and the uncertainties related to the COVID-19 pandemic - The discussion includes forward-looking statements, which are subject to risks and uncertainties, including the evolving impact of the COVID-19 pandemic[90] Recent Events and Company Outlook This section discusses the ongoing impact of COVID-19 on revenue, cost management strategies, and future business uncertainties - Consolidated revenue continued to be negatively impacted by COVID-19 in Q1 2021 compared to pre-COVID-19 results, though Q2 2021 revenue is expected to increase over Q2 2020[91] - The company implemented cost management plans, including limiting third-party services, travel, and discretionary spending, and temporarily stopped 401(k) and Health Savings Account contributions (reinstated May 1, 2021)[96] - The broader impact of COVID-19 on the business, financial condition, and operating results remains highly uncertain[97] Impact of COVID-19 Relief Measures This section details the company's receipt of Paycheck Protection Program (PPP) loans and their terms - Certain subsidiaries received $20 million in unsecured loans under the Paycheck Protection Program (PPP), with $1.7 million received by March 31, 2021, and the balance on April 1, 2021[99] - The PPP loans have various maturity dates through April 1, 2026, accrue interest at 1.0%, and the Company intends to apply for forgiveness, though approval is not assured[99] Non-GAAP Financial Measure This section defines Adjusted EBITDA as a key non-GAAP metric used for performance assessment and debt covenant compliance - Adjusted EBITDA is a key non-GAAP financial metric used by management to assess financial performance, allocate resources, and determine compliance with debt covenants[101][103] - Adjusted EBITDA excludes interest, taxes, depreciation, amortization, stock-based compensation, gains/losses on asset sales, LMA fees, restructuring costs, acquisition/divestiture expenses, non-routine legal expenses, and non-cash impairments from net loss[102] Consolidated Results of Operations This section analyzes the company's consolidated financial performance, including revenue, expenses, and net loss for Q1 2021 and 2020 Consolidated Results of Operations (Three Months Ended March 31, Dollars in thousands): | Metric | 2021 | 2020 | Change ($) | Change (%) | | :---------------------------------- | :------- | :------- | :--------- | :--------- | | Net Revenue | $201,728 | $227,914 | $(26,186) | (11.5)% | | Content Costs | $90,148 | $88,566 | $1,582 | 1.8% | | Selling, General & Administrative Expenses | $90,098 | $103,627 | $(13,529) | (13.1)% | | Corporate Expenses | $16,438 | $11,809 | $4,629 | 39.2% | | Operating (Loss) Income | $(8,579) | $8,259 | $(16,838) | N/A | | Net Loss | $(21,917) | $(7,351) | $(14,566) | N/A | | Adjusted EBITDA | $8,932 | $27,725 | $(18,793) | (67.8)% | - Net revenue decreased by 11.5% primarily due to the negative impact of COVID-19 on broadcast advertising and lower political revenue, partially offset by increased digital revenue (podcasting and streaming) and higher trade revenue from returning sporting events[108] - Corporate expenses increased by 39.2% due to higher personnel costs (incentive and stock-based compensation) and legal fees, partially offset by lower restructuring expense[114] Interest Expense by Debt Instrument (Three Months Ended March 31, Dollars in thousands): | Debt Instrument | 2021 | 2020 | Change ($) | | :---------------------------------- | :------- | :------- | :--------- | | Term Loan due 2026 | $5,512 | $7,181 | $(1,669) | | 6.75% Senior Notes | $7,642 | $8,438 | $(796) | | 2020 Revolving Credit Facility | $188 | $47 | $141 | | Financing Liabilities | $3,578 | $126 | $3,452 | | Other | $629 | $1,367 | $(738) | | Total Interest Expense | $17,549 | $17,159 | $390 | Liquidity and Capital Resources This section assesses the company's cash position, operating cash flow, and strategies for managing liquidity and capital needs - As of March 31, 2021, the Company had $293.8 million in cash and cash equivalents and generated $25.9 million in cash from operating activities for the three months ended March 31, 2021[123] - The Company believes its business model, current cash reserves, and recent balance sheet strengthening actions (asset sales, revolving credit facility draw, PPP loans) will help manage liquidity needs despite COVID-19 uncertainty[125] - The Company continuously monitors its capital structure and evaluates opportunities for additional capital through asset divestitures or issuance of equity/debt securities, subject to market conditions[126] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of the reporting date - The Company did not have any off-balance sheet arrangements as of March 31, 2021[136] Critical Accounting Policies and Estimates This section states that there were no material changes to critical accounting policies and estimates during the quarter - There have been no material changes to the Company's critical accounting policies and estimates during the three months ended March 31, 2021, as detailed in the Annual Report on Form 10-K for 2020[138] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and reports no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2021[139] - There were no changes to the internal control over financial reporting during the three months ended March 31, 2021, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[140] PART II. OTHER INFORMATION This section provides updates on legal proceedings, risk factors, exhibits, and official signatures Item 1. Legal Proceedings This section updates on legal proceedings, including class action lawsuits and the NCAA dispute, with an inability to estimate financial impact - The Company is a defendant in a putative class action lawsuit regarding its 401(k) Plan, alleging breach of fiduciary duties. The Company filed a motion to dismiss remaining claims on March 24, 2021, and intends to vigorously defend the case[144] - Westwood One and the NCAA filed competing lawsuits concerning the Radio Agreement due to event cancellations in 2020 from COVID-19. While litigation continues, an agreement for the 2020-21 college basketball season has been entered[145] - The Company is unable to reasonably estimate the effect of the ultimate outcome of these legal proceedings on its financial position, results of operations, or cash flows[144][145][147] Item 1A. Risk Factors This section directs readers to the Annual Report on Form 10-K for a comprehensive discussion of material risk factors - Readers should refer to Part I, Item 1A, 'Risk Factors,' in the 2020 Form 10-K for information regarding known material risks[148] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including executive certifications and Inline XBRL documents - Exhibits include certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[148] - The report also includes Inline XBRL Instance, Schema, Calculation Linkbase, Definition Linkbase, and Labels Linkbase Documents[148] Signatures This section contains the official signature block, confirming due authorization by the registrant's CFO - The report was signed on May 5, 2021, by Francisco J. Lopez-Balboa, Executive Vice President, Chief Financial Officer of Cumulus Media Inc[151][152]