OUTFRONT Revenues Up 3% in 1Q 2020

OUTFRONT’s first quarter was OK but there’s stormy weather ahead.  Here are the results from OUTFRONT’s 2020 first quarter earnings release and earnings presentation.

  • Revenues increased by 3.5% to $385 million due primarily to an increase in billboard revenue.  Billboard revenues increased by 9% due to increased yields and digital billboard conversions. Transit and other revenues declined by 4%.  CEO Jeremy Male said he expects revenue to be down 50% during the second quarter as the full impact of shelter in place and low transit ridership becomes apparent.
  • Total expenses increased 5% to $298 million during the first quarter of 2020 due to a higher provision for doubtful accounts receivable and increased compensation.  Jeremy Male said the company anticipates reducing expenses by approx $100 million or one-third during the second quarter due to lower billboard and transit lease expenses, layoffs and furloughs.
  • Adjusted OBIDAN (operating income before interest, depreciation and amortization) was flat at $86.8 million.
  • Capital Expenditures totaled $18 million for the quarter.
  • The company ended the quarter with $2.7 billion of long term debt at with an average cost of 4% and a Debt/Cashflow ratio of 4.7x.  The company has received approve from lenders to substitute performance for the 2019 second and third quarters for actual performance in the 2020 second and third quarters in order to avoid going out of compliance with financial covenants.
  • CEO Jeremy Male and CFO Matt Siegel said that OUTFRONT has taken the following steps to conserve cash.Initiated negotiations with transit agencies and landlord about cutting lease costs.
  1. Implemented employee cuts, a salary freeze and furloughs.
  2. Suspended the stock dividend at least until December 2020.
  3. Suspended additional digital sign deployments in New York’s MTA system.
  4. Issued $400 million in preferred equity.
  5. Borrowed $470 million on its bank line.
  6. Suspended digital billboard deployment and acquisitions.

Insider’s take:  Layoffs, lease negotiations and now dividend.  Challenging times at OUTFRONT.  What you think of OUTFRONT’s prospects depends on how fast you think transit ridership and revenues will rebound.  On Friday OUTFRONT stock rose 6% on a day when the S&P rose 2%, Lamar rose 8% and Clear Channel Outdoor declined 1%.

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