With the release of its first quarter 2022 earnings before Wednesday’s Opening Bell on Wall Street, Cumulus Media made it clear that an unsolicited buyout offer from a purported consortium led by Connoisseur Media founder and head Jeff Warshaw did not pass muster with its Board.
At the same time, it revealed that it is moving forward with a share repurchase program — “a clear reflection” of the Board’s confidence in Cumulus’ long-term operating plan.
“We expect to begin this program in the very near term,” Cumulus Media EVP/CFO Frank López-Balboa said during the company’s Q1 2022 earnings call.
Initiating the share buyback plan, a $50 million program, is tied to Cumulus’ net leverage reduction initiatives. And, López-Balboa notes, the company remains on track to reduce its net leverage to below its 3.5x target by the start of 2023.
Cumulus ended Q1 2022 with its net leverage at 3.9x. That’s down from 4.7x year-over-year. As Cumulus head Mary Berner sees it, it’s part of “a rapid deleveraging of our balance sheet,” one that reflects the company’s positive cash flow generation.
Will a dividend to shareholders return? That’s a question a B. Riley Financial analyst posed to López-Balboa on the Q1 2022 earnings call, and he explained that the key focus for those who hold CMLS shares was to delever and lower the amount of publicly available shares by acquiring them “at these attractive levels.”
Indeed, Cumulus’ view that there is “significant upside” in Cumulus’s stock is unwavering — even though CMLS’ 52-week high is just $15.20 and hasn’t ever surpassed $20.90 since this issue of Cumulus began trading following its emergence from Chapter 11 bankruptcy reorganization in 2018. That price was seen on August 27, 2018, just days after CMLS began trading on Nasdaq; it’s the last time Cumulus shares were valued at higher than $20 per share.
Nevertheless, Cumulus’ board and its C-Suite remain convinced that CMLS shares are worth more than they are now — and worth more than they’ve ever been.
“The company is well-positioned to deliver meaningful additional upside value to our shareholders, and we note that our confidence in the company’s growth prospects is also evident among equity research analysts who collectively maintain an average price target of $26.50 per share,” Berner said.
A $26.50 valuation for CMLS may be seen by some radio industry observers as highly aggressive, and perhaps unrealistic. Yes, the 1-year target price is in place. But, it is based on just two analysts who cover Cumulus: B. Riley and Noble Financial.
Can strong political revenue coupled with digital and podcasting growth bring it to a price it’s never yet seen?
Cumulus’ board thinks so. It’s up to investors to follow suit.
