• 6 insights from reading out of home 10k’s

    Insider just finished reading the 2017 10-k’s for the public out of home companies.  This is not an exercise for short attention spans.  The Lamar 10k is 116 pages, Outfront is 123 pages, Clear Channel Outdoor is 117 pages.  JCDecaux doesn’t file a 10k but the 2017 business report is still 88 pages.   

    Here are five things Insider learned for reading each company’s 2017 financial report.

    JCDecaux has the highest revenues. 

    JCDecaux reports financials in euros so Insider adjusted to dollars using a 1.19 dollar exchange rate. 000’s

    JCDecaux has the most employees. 

    Is the transit business really that employee-intensive?  JCDecaux revenues are 40% larger than Clear Channel Outdoor yet it has 125% more employees.  Can someone explain why?


    Lamar has the highest margins. 

    Insider thinks this is because Lamar has a limited transit business and Lamar’s roots are in small markets where every penny counts.  Transit agreements and urban leases are expensive.

    Lamar is the most active buyer. 

    Look at 2017 capital expenditures for the big four.  Lamar spent $297 million on acquisitions.  Lamar said on last week’s conference call that it expects acquisitions to continue at that level in 2018.  000’s

    Clear Channel Outdoor has the highest leverage.

    Insider computed each company’s leverage conservatively by limiting cashflow just to earnings before interest, depreciation, amortization and taxes.  Many of the public companies add back other items like stock compensation and one time items in computing cashflow which makes their figures appear better than this.  Insider thinks sustainable leverage is 5.0 or less.  Clear Channel Outdoor has a ways to go.

    Transit and downtown billboards have high lease costs.

    Everyone wants a high profile, downtown billboard.  Big revenues yes, but also big expenses. Lease costs are 19% of revenues for Lamar’s plant which includes lots and lots of small markets.  Outfront’s primarily urban billboard plant has lease costs which are twice as high as Lamar.  Here’s a quote from from page 48 of Outfront’s 10-k:

    “Billboard property lease expenses represented 35% of billboard revenues in 2017 and 34% in each of 2016 and 2015…Transit franchise expenses represented 63% of transit revenues in each of 2017, 2016 and 2015. The increase in transit franchise expenses in 2017 compared to 2016 was primarily due to the increase in transit revenues, primarily from new 49 contracts (primarily the MBTA), partially offset by the impact of the Disposition (a decrease of $0.8 million compared to 2016).” 

    Here are links to the Lamar 10k, Outfront 10k, Clear Channel Outdoor 10k and JCDecaux 2017 business report.

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