With many across the broadcasting industry discussing The Wall Street Journal‘s July 11 report that Audacy Corp. is initiating discussions with its lenders to refinance its debt and “optimize” the company’s balance sheet, shareholders are expressing newfound wariness in the audio content creation and distribution company led by David Field.
In trading on the Over-the-Counter market on Wednesday, the stock bearing the current ticker symbol for Audacy suffered a 9.6% decline.
It could have been much worse for “AUDAD,” which at 1:36pm Eastern had tumbled to $0.98 before finishing at $1.22 per share.
That’s bad news for Audacy, which saw its shares finish at $2 on July 6, ahead of the steep dip in valuation seen since then.
Given the 1-for-30 reverse stock split engineered by Audacy, the pre-split value of the company’s stock is $0.04066.
With Wednesday’s trading complete, Audacy’s market cap now stands at just $5.95 million.
This could increase concerns among such financial analysts as Craig Huber of Huber Research Partners, who challenged CFO Rich Schmaeling in a somewhat tense Q1 2023 earnings call held May 10.
“To be honest with you, why are costs not down a lot more,” Huber asked. “I know you’re trying to preserve the company for the long term. I’m worried that you’re not going to get to the medium term.
Schmaeling replied that in preparation for the first quarter Audacy’s guidance posted to flat or slightly down costs for the full year. For now, Audacy has updated that guidance. Costs for the last three quarters of the year are expected to decline by 4%, reflecting $35 million in savings.
“The company is continuing to work to reduce its costs, but I think you need to recognize that, if you have as a mental model, what the company did in 2020, and think about how different things are in 2023, they are quite different,” Schmaeling said.
He pointed to a reduction of sports rights fees in the last three quarters of 2020. Salary compensation deferrals were seen. Today, the employment environment means Audacy is “fiercely competing for talent, as are other companies.” Hence, there are costs to take into account. And, there’s history to consider, too. “Our costs this year will be down versus 2019,” Schmaeling said.
He added in his response to Huber that inflation should be considered when looking at the numbers. “I wish a had a magic wand … We are doing everything that we think is practical and prudent to mitigate the persistent advertising weakness we have experienced,” he said. There are few signs of the year-long slowdown abating as of yet.
What does that mean for Audacy? “I think we have likely a few difficult quarters ahead of us,” Schameling warned.
While Audacy had less cash on hand ($83.77 million) as of March 31 compared to the end of 2022 ($103.34 million), its outstanding debt was unchanged.
