• Billboard Cashflow 101

    How much of every dollar of billboard revenue should be left after paying your vendors, landlords and employees?  45 cents according to Boston Omaha, the parent company of Link Media Outdoor.  Take a look at the table which appeared in Seeking Alpha’s Boston Omaha: A Potential Opportunity for Long Term Investors.

    Boston Omaha expects to generate 45 cents of cashflow on every dollar of billboard revenue.

    • Boston Omaha projects land expense (billboard leases costs) of 25% of advertising revenue.  Insider sees land expense of 10-20% of revenue for rural out of home advertising companies or out of home advertising companies which have a strategy of buying as much of the land under their billboards as possible.  Lamar lease costs are 19% of revenue.  Adams lease costs were 15% of revenue for the billboards securing a recent $500 million debt offering.   Land expense can run 30-40% for urban out of home advertising companies who must negotiate with sophisticated landlords and municipalities who appreciate the scarcity value of billboards.  Lease costs are 35% of billboard revenues for Outfront which operates in the top 100 DMAs.

     

    • Boston Omaha projects sales costs at 13% of each dollar of revenue.  Insider is used to seeing sales costs equal to 10-20% of revenue.

     

    • Other costs (e.g. corporate overhead, insurance, vegetation trimming, local taxes and permit fees) are forecasted at 13% of revenues.

     

    • Maintenance costs are forecasted at 4% of revenues.   Maintenance costs are overlooked by many billboard companies.  Steel may last for 50 years but it’s good to build the cost of ongoing maintenance (light replacement and painting) into the calculations.  Digital billboard LED’s have a 100,000 hour useful life and LED’s may account for half the cost of a digital sign.

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