OUTFRONT Media is seeing no sign of a recession-based drop in out of home demand and almost all verticals are up. Here’s a summary of OUTFRONT Media CEO Jeremy Male’s comments at last weeks Goldman Sachs Communicopia conference.
Any signs of a recession?
I sat with our national sales team in Los Angeles…they said no. We feel good. We’re having great conversations…No industry is in a vacuum. But it does feel as if out of home is replicating what is was pre-covid…
What’s up and what’s down?
Just about every vertical is up. We’ve got two categories down. One is insurance and the other is alcohol. What is up? Entertainment, retail, tech, travel – all very strong for us. Maybe against the trend – auto…nicely up…You have a bank of advertisers that somewhat laud out of home and will always be there. Entertainment is the best example…if you look at our footprint which is very New York and LA heavy we’ll always be a benefactor from entertainment…We do have new categories coming in. The most obvious one is sports betting…cannabis has been big for us…
The case for digital billboard conversions
We’re talking about doing a couple hundred boards per year…We are typically still making 4X revenue on a converted board versus 2X cost…that’s driving IRR’s beyond 20%…We’ve seen some increase in costs and we’ve also had some supply chain issues, but…in terms of the returns profile…it’s not going to change our life.
M&A Pipeline
In the last 6 months the biggest purchase we made was a company that was in Portland. We think it’s going to be a great market…It really filled a gap. That is slightly unusual…Typically we are looking for tuck-ins…The market has been quite robust and continues to be…A few months ago it was probably a little frothy. As we’ve seen multiples compress in the public market we’re starting to see that trickle into the private market.
Target Debt/Cashflow
Around about 5 times levered…Our target range is 4-5…We want to be…converting boards…we want to continue to invest in M&A…we think we can deliver the best returns for our shareholders through digital and M&A.
The MTA contract will start throwing off free cash flow within two years
One thing that may be misunderstood about our balance sheet…With the MTA we’ve got a lot of sunk costs. Over the next two years it goes from being a user of cashflow…we’ve built it up…we start recouping monies…that’s a big swing over the next couple of years.
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