OUTFRONT is holding billboard pricing and resuming capital spending according to Jeremy Male. Here’s a selection of his comments at yesterday’s Goldman Sach’s Communacopia conference.
Pricing
We much prefer to maintain rate integrity…If we have an advertiser that’s paying $100, we’d much prefer to provide some incremental benefit, extra space or extra time period, than change the number…the majority of the decline is coming from occupancy, not rate…transit networks aren’t reaching the same audiences so they are priced differently. Anecdotally I haven’t heard that local radio or facebook or local TV have been aggressive in driving the rate down.
Costs
Q3 will look similar to Q2 in terms of our cost base…the biggest piece will be…extinguishing minimum guarantees…we also had to furlough some people…we have taken some fixed costs out of our billboard leases…we are operating with less people…we can expect that other changes to our business, CPI kickers…or changes within our billboard portfolio…going into covid we were a 40% margin billboard business and a 20% margin transit business…coming out of this I think our margins will be the same.
On resuming capital expenditures
We switched off capital for 3-4 months…we’ve switched the tap back on. We believe that any dollar we can put into digital is a $1 well spent…we continue to see an IRR of 25% on digital billboards…we get revenue of 4X and costs of 2X…we’re building our digital pipeline for 2021…absent other macro factors…I would suspect our Capexp will be the same in 2021 as it was in 2019.
Municipalities may be changing towards digital billboards.
With some municipalities it’s possible that they may be taking a more sympathetic view in terms of the out of home industry…they need to look at smart ways to generate incremental revenues for cities…
Target Debt/Cashflow
We’re going to be pleased to get down below 5.0
On the future
We feel great about the markets we’re in, we feel great about the industries we’re in. We’re looking forward to getting back to the 2019 growth rates.
OUTFRONT finished the day up 3.2%, Lamar was up 2.9%, Clear Channel Outdoor was up 0.7% and the S&P 500 was down 0.5%.
[wpforms id=”9787″]
Paid Advertisement
