• Who’s controlling expenses at the Big Three

    A good out of home management team grows revenues faster than expenses.  An additional dollar of revenue doesn’t add an additional dollar of expense because you’re able to leverage your people and plant.  You may have sales commissions (10-20% of collections) and increased lease costs (if you’ve got a % of revenue lease) but that’s it.  Insider drilled down on expenses at the Big Three public out of home firms to see who’s controlling expenses.  The results shouldn’t surprise.

    Total Change in Revenues and Operating Expenses from 2015 to June 2018.

    The chart summarizes the change in revenue and the change in expenses at Lamar, Outfront and Clear Channel Outdoor since 2015 to June 2018  The analysis excludes non-cash charges like depreciation and asset gains (losses) and restructuring charges although you could make the case that restructuring charges should be included in the analysis.

    • Lamar is holding expense growth under revenue growth.  In fact, Lamar’s corporate office expenses have barely grown since 2015.  Direct expenses which are up as you might expect if you are acquiring out of home assets.
    • Expenses at Outfront are growing slightly faster than revenues.  Outfront said on last week’s analyst call that expenses are up due to “strategic business development costs” but the market seems skeptical and some analysts on the earnings call asked about expense increases.
    • Clear Channel Outdoor’s revenues are declining slightly faster than expenses because corporate overhead is growing.  Insider suspects corporate expenses will be reduced significantly once Clear Channel gains independence from iHeart.

    You can see Insider’s detailed expense analysis below.


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