OUTFRONT Media Reports First Quarter 2020 Results

5/8/20

OUTFRONT Media Inc. (NYSE: OUT) today reported results for the quarter ended March 31, 2020.

"Positive momentum in 2019 carried into the first quarter of 2020, despite the impact from the COVID-19 pandemic on our business during March," said Jeremy Male, Chairman and Chief Executive Officer of OUTFRONT Media. "As we move forward, our business will see significant impacts from the pandemic ahead of early signs of improvement we are seeing in audience trends. Recognizing this challenging economic period, we moved quickly to enhance our liquidity, relieve our expense base and cash outflows and, importantly, position ourselves to emerge with financial flexibility as the crisis passes."

First Quarter 2020 Results

Consolidated

Reported revenues of $385.3 million increased $13.6 million, or 3.7%, for the first quarter of 2020 as compared to the same prior-year period. Organic revenues increased $13.8 million, or 3.7%, reflecting the impact of foreign exchange rates.

Reported billboard revenues of $270.9 million increased $19.9 million, or 7.9%, due to higher average revenue per display (yield) and the growth in revenues from digital billboard conversions. Organic billboard revenues increased 8.0% due to higher average revenue per display (yield) and the growth in revenues from digital billboard conversions.

Reported and organic transit and other revenues of $114.4 million decreased $6.3 million, or 5.2%, due primarily to a decrease in yield and a decrease in third party digital equipment sales, partially offset by growth in revenues from digital displays.

Total Operating expenses of $224.8 million increased $7.9 million, or 3.6%, due primarily to higher billboard lease expense and higher posting, maintenance and other expenses. Selling, General and Administrative expenses ("SG&A") of $79.5 million increased $6.2 million, or 8.5%, due primarily to a higher provision for doubtful accounts from the COVID-19 pandemic.

Adjusted OIBDA of $86.8 million was flat.

Segment Results

U.S. Media

Reported and organic revenues of $354.7 million increased $16.3 million, or 4.8%, due primarily to an increase in billboard yield and growth in revenues from digital billboard and digital transit displays, partially offset by a decline in static transit revenues. Billboard revenues increased 8.6% due to an increase in yield and growth in revenues from digital billboard conversions. Transit and other revenues decreased 3.9% due primarily to a decrease in yield as a result of the impact of the COVID-19 pandemic, partially offset by growth in revenues from digital displays.

Operating expenses increased $9.3 million, or 4.8%, due primarily to higher billboard property lease costs and higher posting, maintenance and other costs, partially offset by lower transit franchise expenses due to lower transit revenues. SG&A expenses increased $10.8 million, or 21.4%, due primarily to a higher provision for doubtful accounts and higher compensation and other employee-related costs.

Adjusted OIBDA of $90.8 million decreased $3.8 million, or 4.0%.

Other

Reported revenues of $30.6 million decreased $2.7 million, or 8.1%, due to a decrease in third-party digital equipment sales and a decline in Canada, partially offset by improved performance in our Sports Marketing operating segment. Organic revenues decreased $2.5 million, or 7.6%.

Operating expenses decreased $1.4 million, or 6.0%, driven by lower costs related to third-party digital equipment sales, partially offset by higher costs related to our Sports Marketing operating segment and higher expenses related to Canada. SG&A expenses decreased $0.6 million, or 7.0%, driven primarily by lower expenses related to our Sports Marketing operating segment and Canada.

Adjusted OIBDA of $0.5 million decreased $0.7 million, or 58.3%.

Corporate

Corporate costs, excluding stock-based compensation, decreased $4.5 million, or 50.0%, to $4.5 million, due primarily to lower compensation-related expenses.

Interest Expense

Net Interest expense in the first quarter of 2020 was $29.8 million, including amortization of deferred financing costs of $1.3 million, as compared to $32.7 million in the same prior-year period, including amortization of deferred financing costs of $1.4 million. The decrease was due primarily to lower rates despite a higher outstanding debt balance. The weighted average cost of debt at March 31, 2020 was 4.0% compared to 5.1% at March 31, 2019.

Income Taxes

The benefit for income taxes was $1.7 million in the first quarter of 2020 compared to $1.0 million in the same prior-year period. Cash paid for income taxes in the three months ended March 31, 2020 was $0.8 million.

Net Income Attributable to OUTFRONT Media Inc.Net income attributable to OUTFRONT Media Inc. was $6.1 million in both the first quarter of 2020 and the same prior-year period. Diluted weighted average shares outstanding were 144.7 million for the first quarter of 2020 and 141.1 million for the same prior-year period. Net income attributable to OUTFRONT Media Inc. per common share for diluted earnings per weighted average share was $0.04 for both the first quarter of 2020 and the same prior-year period.

FFO & AFFOFFO attributable to OUTFRONT Media Inc. was $44.7 million in the first quarter of 2020, an increase of $2.6 million, or 6.2%, from the same prior-year period, driven primarily by higher amortization of direct lease acquisition costs and real estate-related intangibles. AFFO attributable to OUTFRONT Media Inc. was $40.0 million in the first quarter of 2020, an increase of $0.8 million, or 2.0%, compared to the same prior-year period, due primarily to lower interest expense and higher amortization, partially offset by lower operating income and higher cash paid for direct lease acquisition costs.

Cash Flow & Capital Expenditures

Net cash flow provided by operating activities of $14.9 million for the three months ended March 31, 2020 decreased $26.5 million, or 64.0%, compared to $41.4 million during the same prior-year period, due primarily to a larger decrease in accounts payable and accrued expenses, and a smaller decrease in accounts receivable. Total capital expenditures increased $0.1 million, or 0.6%, to $18.2 million for the three months ended March 31, 2020, compared to the same prior-year period.

Dividends

In the three months ended March 31, 2020, we paid cash dividends of $55.6 million. In order to preserve financial flexibility and liquidity in light of the current uncertainty in the global economy resulting from the COVID-19 pandemic, our board of directors has decided to suspend our quarterly dividend on our common stock but expects to meet or exceed our minimum annual 2020 REIT distribution requirements.

Balance Sheet and Liquidity

As of March 31, 2020, our liquidity position included unrestricted cash of $487.8 million and $3.5 million of availability under our $500.0 million revolving credit facility, net of $1.5 million of issued letters of credit against the letter of credit facility sublimit under the revolving credit facility. During the three months ended March 31, 2020, no shares of our common stock were sold under our at-the-market equity offering program, of which $232.5 million remains available. Total indebtedness as of March 31, 2020 was $3.0 billion, excluding $26.1 million of debt issuance costs, and includes a $600.0 million term loan, $1.7 billion of senior unsecured notes, $120.0 million of borrowings under our accounts receivable securitization facility, $90.0 million of borrowings under our structured repurchase facility, and $495.0 million of borrowings under our revolving credit facility.

Subsequent Event

On April 20, 2020, we issued and sold $400.0 million in newly issued convertible, perpetual preferred stock in a private placement, which is convertible into shares of our common stock at a conversion price of $16.00 per share. The convertible preferred stock carries a 7.0% annual dividend, which will be payable at our option in cash or in-kind, subject to certain exceptions and conditions. On an as-converted basis, the convertible preferred stock will represent approximately 14.8% of our outstanding shares of common stock.

COVID-19 Pandemic

The COVID-19 pandemic and the related preventative measures taken to help curb the spread, have had, and may continue to have, a significant impact on the global economy and our business. The COVID-19 pandemic has (i) interrupted our ability to build and deploy advertising structures and sites, including digital displays; (ii) reduced or curtailed our customers' advertising expenditures and overall demand for our services through purchase cancellations or otherwise; (iii) increased the volatility of our customers' advertising expenditure patterns from period-to-period through short-notice purchases, purchase deferrals or otherwise; and (iv) extended delays in the collection of earned advertising revenues from our customers, all of which could have a material adverse effect on our business, financial condition and results of operation in 2020. As a result of the impact of the COVID-19 pandemic on our business and results of operations, we expect our key performance indicators and total revenues to be materially lower in 2020 than historical levels, particularly in our U.S. Media segment and with respect to our transit and other business. Additionally, we expect transit franchise expenses, billboard property lease expenses and posting, maintenance and other expenses, such as rental expenses and minimum annual guarantee payments, to materially increase as a percentage of revenues more than historical levels, as revenues decline in 2020. We expect the impacts described above to be greater in the second quarter of 2020 than in the third and fourth quarters of 2020. Accordingly, results for the three months ended March 31, 2020, are not indicative of the results that may be expected for the fiscal year ending December 31, 2020. In order to preserve financial flexibility and increase liquidity in light of the current uncertainty in the global economy and our business resulting from the COVID-19 pandemic, we undertook the following actions, among others: borrowed nearly all of the remaining available amount under the revolving credit facility and amended the credit agreement governing the revolving credit facility to modify the calculation of our financial maintenance covenant ratio, completed the private placement described above, and reduced or deferred capital expenditures and expenses through cost-savings initiatives. Given the uncertainty around the severity and duration of the COVID-19 pandemic and the measures taken, or may be taken, in response to the COVID-19 pandemic, we cannot reasonably estimate the full impact of the COVID-19 pandemic on our business, financial condition and results of operations at this time, which may be material.

About OUTFRONT Media Inc. 

OUTFRONT leverages the power of technology, location and creativity to connect brands with consumers outside of their homes through one of the largest and most diverse sets of billboard, transit, and mobile assets in North America. Through its technology platform, OUTFRONT will fundamentally change the ways advertisers engage audiences on-the-go.

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