OUTFRONT Media Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. OUTFRONT is a REIT providing billboard and transit advertising in the U.S. and Canada.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $373.5 million | $259.2 million |
| Operating income (loss) | $28.5 million | $(31.0) million |
| Net loss attributable to OUTFRONT | $(0.1) million | $(67.7) million |
| Adjusted OIBDA | $70.2 million | $11.1 million |
| Adjusted OIBDA margin | 19% | 4% |
| FFO / AFFO attributable to OUTFRONT | $41.8 million / $35.5 million | $(30.4) million / $(24.5) million |
| Operating cash flow | $20.5 million | $(10.8) million |
Billboard revenue was $298.2 million, up 33%; transit and other revenue was $75.3 million, up 112%. Management attributed growth chiefly to stronger demand and higher revenue per display, including increased transit ridership. GAAP diluted loss per share was $0.04 versus $0.52.
Liquidity, debt and cash flows
- Cash was $355.7 million at March 31, down from $424.8 million at year-end. Working capital was $194.9 million, compared with $269.6 million.
- Net long-term debt was $2.622 billion; weighted average debt cost was 4.3%. The $500 million revolving credit facility had no borrowings. The $600 million term loan carried a 2.2% rate.
- The company reported compliance with debt covenants. Total leverage was 5.8x against a 6.0x covenant threshold; net secured leverage was 1.0x against 4.5x.
- Investing cash outflow was $27.8 million and financing cash outflow was $62.4 million. The net cash decrease was $69.1 million. Financing outflows included $51.5 million of dividends.
- The accounts-receivable facility had no borrowings and no available capacity while temporarily suspended; it was scheduled to terminate in June 2022 unless extended.
Material changes and unusual items
- Revenue rose 44%, while Adjusted OIBDA increased to $70.2 million from $11.1 million. Results benefited from post-pandemic demand recovery and comparison with a prior-year period affected by COVID-19.
- Interest expense declined to $30.7 million from $34.6 million, primarily due to a lower average debt balance. Q1 2021 included a $6.3 million debt-extinguishment loss.
- On March 1, 2022, 275,000 Series A preferred shares converted into approximately 17.4 million common shares, including accrued dividends. About 125,000 preferred shares remained outstanding at quarter-end.
- Common stockholders’ equity reflected $49.3 million of declared common dividends for the quarter; the company also announced a $0.30-per-share quarterly cash dividend payable June 30, 2022.
Outlook, commentary and risks
- Management expected 2022 revenue to improve versus 2021 and approach or potentially exceed pre-COVID levels, supported by billboard performance. Transit and other revenue was expected to improve but remain materially below pre-pandemic levels until 2023; Adjusted OIBDA was expected to improve but remain below pre-pandemic levels.
- Management projected approximately $85 million of 2022 capital expenditures and approximately $125 million of 2022 MTA equipment deployment costs. It said MTA deployment costs were unlikely to be recouped during the remainder of 2022.
- COVID-19 recovery, transit ridership, advertising demand, inflation and supply-chain/logistics constraints could affect results. Management cited digital-display delivery delays and price increases, and expected doubtful-account provisions to rise through the rest of 2022.
- The MTA agreement requires substantial screen deployments and guaranteed minimum payments. Unrecovered deployment costs could adversely affect results; the company had recorded $295.2 million in prepaid MTA deployment costs at quarter-end.
- Other key exposures include substantial indebtedness, interest-rate sensitivity, renewal and competitive bidding of municipal transit contracts, seasonality, and dependence on external financing. Management stated that current litigation was not expected to have a material adverse effect and reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether revenue and margin recovery continues, especially as transit ridership and transit advertising remain below pre-pandemic levels.
- Progress, remaining costs and potential recovery of MTA equipment deployments, including the projected $125 million of 2022 costs.
- Availability or extension of the accounts-receivable facility and the company’s liquidity and covenant headroom.
- Debt-service capacity and interest-rate exposure, including the variable-rate term loan and the leverage ratio near its stated covenant threshold.
- Effects of the preferred-share conversion, remaining preferred dividends, common dividends and potential dilution.