Is Cumulus Media ‘A Cash Printing Machine’?


Cumulus Media is generating “tons” of free cash flow. Future free cash flow guidance is “optimistic.”

With those glowing words, and a declaration that radio is not dying anytime soon but is “merely evolving,” Seeking Alpha says a reconstituted, post-bankruptcy Cumulus is printing dollars.

How so? Here’s its explanation of why the No. 3 licensee of radio stations is on solid footing, even as it pares down assets.

With Cumulus shares up 1.8% to $16.16 in mid-afternoon trading and ending at $15.87 on Tuesday (2/19), the company led by CEO Mary Berner is in debt-leverage mode.

The company is shedding WPLJ-FM in New York and traded FM market sibling WNSH, along with two Springfield, Ma.-market stations, to Entercom in exchange of three FMs in Indianapolis.

For Seeking Alpha, Cumulus’s recent bankruptcy and “small size” is causing “a substantial disconnect between current price and intrinsic value.”

It calls Cumulus “a classic ‘deep value’ investment — unloved, unnoticed, undervalued.”

Seeking Alpha continues, “Maybe it’s the fact that it’s been through bankruptcy, or maybe it is its debt load, but investors are avoiding Cumulus like the plague. However, we believe there’s value to be found in this little-known company.”

Yes, there are risks, Seeking Alpha warns — including a recession. But, there are ways to hedge that risk. More importantly, “the cheapness is just too tempting to ignore, and the risks can be easily hedged, as we will show.”

Fundamentally, it states, “radio is audio entertainment, it has its own niche, and that niche has been and likely will not be disrupted for a very long time, if not forever.”

The former debtor-in-possession status and soon-to-be-exiting status of Cumulus and the nation’s No. 1 owner of radio stations, iHeartMedia, is noted. While this cast a dark cloud on Radio, Seeking Alpha reminds investors of the root cause of this issue: stagnant revenue and a large debt load, not a secular decline.

“Most investors are fleeing the industry due to all the negative publicity surrounding radio, but we believe the decline is nowhere as severe as stated, and of course, as Baron Rothschild once said: The time to buy is when there’s blood in the street.

And, if Cumulus keeps generating the level of cash flow it saw in Q3 and Q4, “it can earn more than its market cap in just 3 years,” Seeking Alpha predicts.

Further, new podcasting initiatives are seen as revenue enhancers.

With its debt pile cut in half and its term loan interest being slightly lower than the interest rate of its old debt, which yielded over 7.75% per annum, Cumulus in 2019 could be a pace setter.

“Any way you cut it, Cumulus is cheap,” Seeking Alpha concludes. “Free cash flow will most likely surpass the current market cap in 2-3 years, allowing Cumulus to pay down its debt and improve its financial condition, which creates shareholder value. Value will gradually be transferred from debt-holders to equity holders. When a targeted leverage ratio is reached, management should start returning cash to shareholders. The best thing about this prediction is that it shouldn’t take too long to materialize. Given Cumulus’s high free cash flow, balance sheet improvement should happen rapidly, at which point investors will start reevaluating the company and giving it a higher valuation. Either way, we are optimistic about Cumulus’s future.”