OUTFRONT Media Inc. — 2022 Form 10-K
Business context and reporting period. OUTFRONT Media is a REIT selling out-of-home advertising space on billboards and transit displays in the U.S. and Canada. This filing covers the fiscal year ended December 31, 2022; annual results are presented, not a separate fourth-quarter income statement. U.S. Media is the reportable segment; International is included in Other.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $1,772.1 million | $1,463.9 million | +21% |
| Operating income | $287.7 million | $168.3 million | +71% |
| Net income attributable to OUTFRONT | $147.9 million | $35.6 million | Up $112.3 million |
| Adjusted OIBDA (non-GAAP) | $472.4 million | $340.3 million | +39% |
| Adjusted OIBDA margin (non-GAAP) | 27% | 23% | +4 percentage points |
| FFO / AFFO attributable to OUTFRONT (non-GAAP) | $325.2 million / $311.3 million | $195.1 million / $205.1 million | FFO +67%; AFFO +52% |
| Operating cash flow | $254.1 million | $98.8 million | +157% |
| Capital expenditures | $89.8 million | $73.8 million | +22% |
Billboard revenue was $1,384.7 million, up 17%; transit and other revenue was $387.4 million, up 38%. Growth reflected stronger demand and higher revenue per display, increased transit ridership, and acquisitions. Digital advertising revenue rose to $539.9 million from $389.4 million. Management reports that digital billboards generate about four times the revenue per display of static billboards, but also have higher costs.
Interest expense was $131.8 million versus $130.4 million. The 2022 income tax provision was $9.4 million, compared with a $3.4 million benefit in 2021. Diluted earnings per share reported in the statements of operations were $0.84 versus $0.05.
Liquidity, debt and capital allocation
- Cash and cash equivalents fell to $40.4 million from $424.8 million. Working capital was negative $161.2 million, versus positive $269.6 million, primarily reflecting lower cash after acquisitions.
- Net debt carrying value was $2.656 billion at year-end, compared with $2.621 billion. The weighted average cost of debt increased to 5.2% from 4.3%. Debt includes $2.05 billion of senior unsecured notes, a $600 million variable-rate term loan due 2026, and $30 million drawn under the accounts-receivable facility.
- The $500 million revolving credit facility, maturing in 2024, had no borrowings at year-end. The $150 million receivables facility had $120 million of remaining capacity. The company reported compliance with debt covenants; total leverage was 5.0x and secured net leverage 1.1x under the credit agreement definitions.
- Cash used in investing was $449.5 million, including $353.9 million for acquisitions. Financing activities used $188.0 million; cash dividends paid across common stock, preferred stock and vested restricted share units totaled $205.8 million.
Material changes and management commentary
- U.S. Media revenue increased 21% to $1,673.9 million and Adjusted OIBDA increased 31% to $501.2 million; segment margin rose to 30% from 28%. Other revenue increased 20% to $98.2 million and Adjusted OIBDA rose to $20.6 million from $10.4 million.
- The company completed a $185 million acquisition of approximately 950 billboard displays in Oregon and Washington in the second quarter. Total 2022 asset acquisition spending was $353.9 million.
- Inflation, higher interest rates, and supply and logistics disruptions increased operating costs and delayed or raised the cost of some digital displays. Management expects these pressures to continue in 2023; some costs may be offset by pricing and efficiencies.
- Transit ridership in major markets remained materially below pre-pandemic levels. Management expects ridership and revenue to grow but does not expect ridership to return to pre-pandemic levels in 2023.
Outlook, commitments and key risks
- Management expects 2023 capital expenditures of approximately $90 million, excluding MTA equipment deployment costs. MTA deployment costs are expected to be approximately $100 million in 2023 and approximately $140 million in aggregate over 2023–2024. No MTA deployment-cost recoupment was recorded in 2022, and none is expected in 2023.
- The MTA program is a significant execution and recoverability exposure: $426.8 million of related deployment costs and assets were recorded at year-end, including $363.2 million in prepaid MTA equipment deployment costs. Recovery depends on future revenues and the contract; failure to achieve projections could lead to impairment or expense.
- Guaranteed minimum annual payments under transit franchise agreements totaled $1.466 billion over future periods, including $212.7 million due in 2023. Operating lease payments totaled $2.215 billion, including $2.104 billion for billboard sites.
- Key risks include advertising-market weakness, inflation and interest-rate exposure on variable-rate debt, transit franchise renewals and minimum payments, digital rollout costs and performance, regulation of outdoor advertising, cybersecurity and privacy, and REIT qualification and distribution requirements. The U.S. Transit and Other goodwill valuation depends on ridership recovery, digital deployment and franchise renewals; the filing reports no impairment but notes potential future impairment sensitivity.
- The board approved a common dividend of $0.30 per share for payment in March 2023. The filing does not provide formal 2023 revenue or earnings guidance. Management stated current litigation is not expected to materially affect results, financial position or cash flows.
Most important facts for investors to verify
- Whether operating cash generation and liquidity can support dividends, debt service, acquisitions, and the planned digital and MTA spending after the substantial year-over-year cash reduction.
- Progress, remaining costs, revenue generation and recoverability of the MTA deployment, including whether the contractual recoupment assumptions remain achievable.
- Transit ridership and franchise economics, especially MTA guaranteed minimum payments and the timing of contract renewals.
- Debt refinancing and interest-rate exposure, including the 2024 revolver maturity and the cost of variable-rate borrowing.
- How much reported growth and profitability reflect organic demand versus acquisitions, and how non-GAAP OIBDA, FFO and AFFO reconcile to GAAP results.
PricewaterhouseCoopers LLP issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective as of December 31, 2022. The audit identified the MTA agreement accounting and U.S. Transit and Other goodwill impairment assessment as critical audit matters.