• Shassian on ipads for walls and 4 initiatives.

     Outfront CFO Donald Shassian spoke at the 26th annual Deutsche Bank Media, Telecom and Business Services conference on Tuesday.  Here are the highlights.

    On driving up out of home rates

    This has been an issue since Jeremy and I came on board…We’ve been putting an emphasis with our people to make sure we’ve got a good rate and don’t fluctuate that rate.  Because when you drop that it’s difficult to bring it back up…Last year was a year where rates were OK but occupancy was down.

    On the Boston transit contract

    We’ve deployed 200 liveboards.  I call them ipads on a wall…We’ve got several hundred more that will be deployed this year.  They’re great.  Advertisers are loving them.  I’m hoping in the next several months that we can talk about what kind of life these boards generate.  We’ve mentioned that digital to static billboard conversions generate a 4-6 times life in revenue…

    On transit contracts coming up for bid this year.

    We just renewed the LA bus contract.  It’s a $35-37 million contract.  The LA rail contract we did not retain.  It’s $3 million.  They wanted to deploy these screens which we are deploying elsewhere and it didn’t make a lot of sense.  It was an 8 figure amount of capital expense and we just couldn’t see the return…BART is out for bid…Chicago is the next big one…that will be in 2019.

    On Outfront’s four strategic initiatives.

    We’ve been going after four areas.  One was…using our billboards for leasing to cellular companies.  Two was build a mobile product.  So we have a geofencing product to complement billboard advertising with something which can be pushed onto a smartphone.  Third is the development of these liveboards…part of that also is a content management system to manage all that content…The fourth one is developing the systems where we can sell by audience.  Today our assets are bought by location…We’re building the capability to give companies the choice to sell by audience.  We’ve got an alpha product we’re going to be sharing with 12 of our largest clients to get their input…

    On the MTA contract

    The MTA would like a couple of stations deployed in the second quarter…This is a $210 million annual contract.  It is the subway system…The request was to deploy these digital displays over 5-6 years.  We get recoupment of these dollars by retaining all of the incremental $$ over the base $210 million…$800 million is how much we will be spending over a 10 year period…We expect about $100 million in 2018.  Both purchasing and deploying 3,000 screens…We think our peak financing will be about $300 million.

    On why Debt/Cashflow is above Outfront’s 3.5-4.0 target.

    Our inability to hit the target was because billboard did not grow in two of the three past years…Billboard needs to grow…As we do the MTA build the leverage may tick up, but we think we can grow OIBDA to get out leverage down…I lived through 2008 and I believe that our leverage needs to get down…to give us flexibility if and when anything happens.

    On mergers and acquisitions

    We don’t think we need more scale to be successful.  We’re looking for acquisitions that can enhance our portfolio in certain markets where we can buy them at a good price and grow the revenues more than the incumbent…Right now it’s pretty active…We’re judicious.  We’re being very careful about what we invest in.  Given our size there are certain markets be can’t invest in because of our size…I suspect that if Clear Channel is spun off it will be run for a certain period of time and then sold.

    On Outfront’s strategy to shift from location selling to audience selling.

    We could try to do it as an industry.  Very difficult to get people in a room to make a change like this.  So we are actually doing something on our own.  We are building a data management platform.  We are buying cellular data…Educating our salesforce to sell this way is a big hurdle.

    Insider’s take:  Shassian quipped at the end of the talk that sales/leasebacks appear to be an interesting idea.  Might there be something brewing with Landmark for the sale/leaseback of some billboard sites?  Outfront needs to raise $100 million this year to finance the MTA liveboards and has best relationship with Landmark of the big three.


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