OUTFRONT Media Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. OUTFRONT is a REIT operating out-of-home advertising displays in the U.S. and Canada, with U.S. Media (billboard and transit) as its principal reportable segment.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $399.2 million | $282.3 million | $999.4 million | $900.5 million |
| Operating income | $65.0 million | $25.1 million | $63.1 million | $33.0 million |
| Net income (loss) attributable to OUTFRONT | $33.1 million | $(13.5) million | $(35.5) million | $(65.3) million |
| Diluted EPS | $0.18 | $(0.14) | $(0.39) | $(0.54) |
| Adjusted OIBDA and margin | $108.1 million; 27% | $59.4 million; 21% | $189.2 million; 19% | $150.3 million; 17% |
| FFO / AFFO attributable to OUTFRONT | $74.6 / $79.0 million | $22.6 / $27.7 million | $83.9 / $94.1 million | $39.4 / $46.4 million |
Q3 revenue rose 41%; billboard revenue increased 32% and transit and other revenue increased 93%, largely as advertising demand and revenue per display recovered from pandemic lows. For the nine months, reported revenue increased 11% and organic revenue increased 14%. Billboard revenue grew 18%, while transit and other revenue fell 15% reported and 3% organically. The prior-year comparison includes the 2020 Sports Marketing disposition.
Cash flow, balance sheet and debt
- Operating cash flow for the first nine months was $45.1 million, down from $86.0 million. Investing cash outflow was $106.5 million; financing cash outflow was $140.5 million. Cash declined $201.7 million from year-end to $510.3 million.
- Capital expenditures were $41.2 million year to date. Working capital was $324.4 million, down from $439.8 million at December 31, 2020.
- Net debt was $2.619 billion, versus $2.701 billion at year-end; weighted average debt cost was 4.3%. The $500 million revolving credit facility had no borrowings. The accounts receivable facility was temporarily suspended with no borrowing capacity at quarter-end.
- Management reported compliance with debt covenants. The credit-agreement Consolidated Total Leverage Ratio was 8.2x; the 6.0x threshold disclosed applies to an exception permitting additional debt. Consolidated Net Secured Leverage was 1.4x against a 4.5x limit.
Outlook, risks and notable items
- Management expected key performance indicators and revenue to improve through the rest of 2021 versus 2020, but remain materially below pre-pandemic levels, particularly in U.S. Media and transit. The filing cautions that year-to-date results are not indicative of full-year results.
- 2021 capital expenditure guidance was approximately $70–75 million, excluding MTA deployment costs. MTA equipment deployment costs were expected to be approximately $100 million for 2021. No deployment-cost recoupment occurred in the first nine months, and management said further recoupment in 2021 was unlikely.
- The MTA agreement’s guaranteed minimum payments resumed in 2021; deferred amounts from April–December 2020 are added to payments due from 2022 through 2026. Transit franchise expenses as a percentage of revenue were expected to be materially higher than pre-pandemic levels. The agreement’s initial term was extended from 10 to 13 years in July 2021.
- Management cited continuing COVID-19 uncertainty, advertising spending and transit ridership, supply and logistics disruptions affecting digital displays, competition, municipal contract renewals, and substantial indebtedness as risks. It could not reasonably estimate the pandemic’s full financial impact.
- OUTFRONT issued $500 million of 4.25% notes due 2029 and redeemed its 5.625% notes due 2024, recording a $6.3 million debt-extinguishment loss. It paid $21.0 million in preferred dividends year to date. The board approved a $0.10 per-share common dividend payable December 31, 2021.
- Routine litigation was not expected by management to have a material adverse effect. No material changes to previously disclosed risk factors were reported.
Investor verification priorities
- Assess whether advertising recovery, especially in transit and major urban markets, supports management’s recovery expectations.
- Track operating cash flow, liquidity and the availability of the suspended accounts receivable facility alongside debt and interest obligations.
- Review the 8.2x total leverage ratio, covenant definitions and limitations on additional borrowing, dividends and other restricted payments.
- Monitor MTA deployment spending, guaranteed minimum payments, equipment-cost recoupment and the effect of transit costs on margins.
- Consider preferred-stock dividends and potential conversion dilution: up to 25.0 million common shares could be issued on conversion, subject to the preferred-stock terms.