OUTFRONT Media Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed February 26, 2021. OUTFRONT is a REIT operating billboard and transit out-of-home advertising businesses in the U.S. and Canada.
Financial performance
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $1,236.3 million | $1,782.2 million | (31%) |
| Operating income | $72.5 million | $309.1 million | (77%) |
| Net income (loss) attributable to OUTFRONT | $(61.0) million | $140.1 million | Declined to a loss |
| Adjusted OIBDA and margin | $233.3 million; 19% | $474.2 million; 27% | (51%) |
| FFO / AFFO | $82.6 million / $96.3 million | $295.3 million / $334.1 million | (72%) / (71%) |
| Cash from operating activities | $130.6 million | $276.9 million | (53%) |
| Capital expenditures | $53.5 million | $89.9 million | (40%) |
Revenue fell across both principal categories: billboard revenue declined 18% to $978.6 million, while transit and other revenue declined 56% to $257.7 million. The U.S. Media segment generated $1,148.9 million of revenue and $268.9 million of Adjusted OIBDA, down 29% and 46%, respectively. In the fourth quarter, revenue was $335.8 million, Adjusted OIBDA was $83.0 million, and net income attributable to OUTFRONT was $4.3 million.
At year-end, cash and cash equivalents were $710.4 million, working capital was $439.8 million, and total debt, net, was $2.70 billion. The $500 million revolving credit facility had no borrowings outstanding; $80 million was drawn under the Repurchase Facility at year-end, and that balance was repaid in January 2021. The weighted-average cost of debt was 4.5%. The company reported compliance with its debt covenants; its secured leverage ratio was 1.1x, while its total leverage ratio was 9.9x.
Material changes and unusual items
- COVID-19 sharply reduced advertiser demand, traffic and transit ridership. Management said the effects were greatest in Q2, followed by incremental improvement in Q3 and Q4.
- To increase liquidity, OUTFRONT issued $400 million of 6.25% notes due 2025 and raised $400 million through Series A preferred stock, with a 7% cumulative dividend. It suspended common-stock quarterly dividends, subject to the REIT distribution requirement.
- The company sold its Sports Marketing business for approximately $34.6 million in cash and recorded a $7.2 million gain. It also recorded $5.8 million of restructuring charges, primarily workforce-reduction severance.
- In February 2021, OUTFRONT used proceeds from a $500 million 4.25% notes issuance due 2029, together with cash, to redeem all outstanding 2024 notes; it recorded a $6.3 million extinguishment loss in Q1 2021.
- Goodwill impairment testing in Q4 2020 identified no impairment. The auditor identified the MTA agreement accounting and goodwill assessments for U.S. Transit and Canada as critical audit matters. The auditor also opined that financial statements and internal controls were effective.
Outlook, risks and contingencies
Management expected key performance indicators and revenue to improve incrementally in 2021 versus 2020, but remain materially below pre-pandemic levels, especially in transit and other businesses. It expected total expenses to rise from 2020 while remaining below pre-pandemic levels. For 2021, it estimated capital expenditures of approximately $85 million, excluding MTA deployment costs of approximately $125–$150 million.
MTA minimum annual payment obligations resumed January 1, 2021. The company did not recoup MTA equipment deployment costs in 2020 and said recoupment in 2021 was unlikely; insufficient future advertising revenue could make some deployment costs unrecoverable. Total MTA-related deployment costs recorded as prepaid costs and intangible assets were $291 million at year-end. Management’s outlook remained subject to uncertainty about the pandemic and the pace of recovery.
Key risks include continued weakness in advertising demand and transit use; substantial debt and restricted financing flexibility; municipal contract renewals and guaranteed payments; digital-display deployment, cost recovery and regulation; REIT qualification and distribution requirements; and impairment risk if forecasts deteriorate. Contractual obligations included $1.36 billion of transit guaranteed minimum payments and $1.97 billion of operating lease payments. Management did not expect ongoing litigation to have a material adverse effect.
Investor verification priorities
- Track recovery in billboard yield, transit ridership and advertising demand against management’s 2021 outlook.
- Review liquidity, debt maturities, covenant headroom, refinancing terms and the effect of preferred dividends on cash available to common shareholders.
- Monitor MTA deployment spending, revised payment obligations and evidence that recorded deployment assets can be recovered from future revenues.
- Assess common-dividend policy and REIT distribution needs alongside operating cash flow, capital spending and debt restrictions.
- Compare reported GAAP results with Adjusted OIBDA, FFO and AFFO; these are non-GAAP measures and are not substitutes for operating cash flow.