Bad debt expense (e.g. revenue which is never collected) should be minimal at your out of home company because you can require payment within 30 days or you’ll take an ad down.  You can also require customers with weak credit history to personally guarantee the contract or pay in advance.  And encouraging clients to pay via credit card or bank transfer eliminates the checks-in-the-mail excuse.

Here’s an analysis of the provision of credit losses taken by the public out of home companies for the past four years, sponsored and analyzed by SignValue.  We focus on the provision for credit losses because it represents the amount of money each company is expensing every year in anticipation of future credit losses.

Bad debt provisions averaged a low 0.31% of revenues for the three public US out of home companies for 2022 to 2025.   Put another way, the public companies had bad debt expenses of only $3,100 for ever $1 million in revenues.  Keep in mind that the last four years have had moderate economic growth with no recession.

Bad debts rise during a recession because businesses fail.  To examine what might happen in a bad economy we performed the same analysis for 2008-2009 when the economy was in the middle of the Great Recession and again in 2020 when the economy was in the middle of Covid.  We don’t have the figures for OUTFRONT for 2008-2009 because it was part of CBS and the billboard operation wasn’t broken out in detail.    It should be no surprise that bad debt quadrupled from an average of 0.31% of revenue during the good years to 1.2% of revenue during the bad years.  During the bad times the public out of home companies has bad debt expense of $12,000 for every $1 million in revenue.  Here’s the analysis (revenue and provision for credit losses in millions).

If you have questions, contact one of SignValue’s experienced analysts for a free and confidential consultation at info@signvalue.com or call 480-657-8400.

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