Q1 2021 OUTFRONT Media Inc Earnings Call
Ladies and gentlemen, and good day and welcome to the first quarter 2021 earnings conference call. At this time I would like to turn the conference over to Mr. Greg Lundberg. Please go ahead Sir.
Good afternoon, everyone. Thank you for joining our 2021 first quarter earnings call on the call today are Jeremy male chairman and Chief Executive Officer.
And Matthew Siegel Executive Vice President and Chief Financial Officer.
After a discussion of our financial results, we'll open up the lines for a question and answer session.
Our comments today as usual, we will refer to the earnings release and a slide presentation that you can find and the Investor Relations section of our website out front of media Dot com.
After today's call has concluded and audio archive will be available there as well.
This conference call May include forward looking statements relative factors that could cause actual results to differ materially from these forward looking statements are listed in our earnings materials and.
Our SEC filings.
<unk>, our 2020 form 10-K.
And our 10-Q, which should be filed tomorrow.
We will refer to certain non-GAAP financial measures on this call and any references to OIBDA of made today will be on an adjusted basis and reconciliations of OIBDA and other non-GAAP financial measures are in the appendix of the slide presentation, the earnings release and on our website.
And I will now turn the call over to Jeremy who is sitting right next to me.
Thanks, Craig and thank you all for joining US today I'm pleased to tell you that I'm sitting here on on Manhattan office with both Matt and Greg.
Oh, Thanks, and I said and I'm happy to be putting 2020, and the worst of the pandemic firmly into the rear view.
Talking about reviews before.
Before I review, the first quarter and I'd like to break with tradition today and look forward and stuff.
So let's begin with the second quarter outlook.
Right now all of our expectations for the second quarter is for return to significant growth.
With total revenues up and the mid to high 40 per cent range.
Well. This is obviously on 2020 pandemic lows. It is a big step forwards towards a record 2019 levels and we feel increasingly positive about the rest of the year.
With that said now let's get back to a review of the first quarter, which is summarized on slide free.
As we discussed with you in February our outlook for the first call and there wasn't much different from the fourth quarter because simply.
The country haven't made substantive progress in terms of vaccinations and reopening.
Total revenues were down 30%, but the law.
Low end of our guidance range and adjusted for last year's sale of our sports marketing business.
It's worth remembering that we had a pretty strong first quarter of last year when Billboard revenues grew by 8%.
While we were able to enjoy some variable expense reduction the revenue decrease led to a steep decline and both OIBDA and Oh.
Let's turn to slide four which is the most detailed view of our U S media revenues.
Billboard revenues were down 17%, while transient revenues were down 67 per cent.
Ridership across the country has remained stubbornly low with well ride the ship at around 25 per cent of pre pandemic levels.
But we all know seeing some green shoots.
Weekly ridership on the New York City Subway for example was up around 40% at the end of April compared to the fourth quarter average of.
Obviously, not where it needs to be but it's nice to see that it's starting to move and the right direction.
Turning to slide five you can see the national advertising was down more than local.
Part of this is due to the fact that national has historically been more weighted towards transit and part of it is to to particular advertising categories. Most obviously T V entertainment movies and travel.
And I'll discuss this in more detail later in the call the.
The absence of these categories also impacted the Billboard yields.
And so you can see on slide six total yields were down 15% essentially in line with our revenues.
Our digital business on slide seven.
Some very tough comps.
Last year of total digital revenues were up 13, 9% and Q1 with transit up 67 per cent and contributing nearly half the dollar growth.
Despite this quarters decline, it's good to see the digital is holding steady on this proportion of of our total revenues and we expect this to be expanding further as all business rebounds.
The complete our revenue picture for the quarter slide eight shows the other business, which principally comprises of business in Canada, where revenues declined 27 per cent.
And this reflects the same market issues, we saw in the U S and some more significant lockdowns and we've had here.
Let me now hand over to Matt to review, our first quarter and more detail.
Good afternoon, and thank you for joining our call today.
Please turn to slide nine we will begin with our expenses.
Overall, our total expenses were down $62 million year over year.
This is the west and the run rate during most of the 2020 due mainly to the fact and as we mentioned on the February call. We are paying the minimum annual guarantee on the New York MTA contract.
And set of revenue share on the lower revenues.
However, we continue to be and revenue share and our other key transit systems.
We also saw some continued benefit and lower Billboard lease costs.
Posting and maintenance expenses were down $20 million with half of that reduction coming from the sale of sports marketing waste here.
SG&A.
So at about the same amount as last quarter, reflecting some of the steps we took last year and from.
On the lower allowance for doubtful accounts as our collections were better than we expected.
The OIBDA of bridges on slide 10.
As you know the first quarter is always our lightest given the relatively high fixed cost nature of the business.
We ended up of $11 million slightly ahead of where we thought and bringing us to the entire pandemic and positive territory.
Slide 11 gives you color on the OIBDA of composition and.
Remember that operating leverage works, both ways and as we start growing revenues from here.
We expect to see significant EBITDA growth rates throughout the year.
Let's now turn to capital expenditures on slide 12.
The lower amounts of this quarter reflects timing issues.
And it's our intention to bring our total growth spending back to pre pandemic levels and had 150 to 200 digital billboards to our portfolio.
Our guidance for the year is unchanged at $85 million of total capex.
Slide 13 shows the bridge and the F S O.
The biggest driver remains OIBDA seems changes and the other categories were very minor.
This quarter was negative as anticipated and right now we feel that it's likely we will be ahead of our previously indicated guidance range of 25% to 30% annual growth for 2020 one.
As you know the Billboard business continues to gain momentum and we look forward to updating our guidance as the year progresses.
Turning to slide 14 for and MTA update.
You can see the lease was he was of light deployment quarter.
We remain constructive conversations with the M T a regarding the scope and tenor of the contract.
B and a position to update you more fully in the near future.
In the meantime, we reduced our annual 2021 equipment deployment estimates to approximately $100 million down from $125 million to $150 million previously.
Now, let's turn to our balance sheet on slide 15.
Our liquidity remains strong at $1 $1 billion.
Our revolver remains undrawn and cash.
Cash is down slightly from year end due to some proactive actions we took during the quarter.
We paid off the $80 million outstanding under our repurchase facility.
We refinanced the five and five 8% senior notes with the same amount of four and a quarter per cent notes, which incurred from closing costs.
And we spent $16 million on tuck in digital Billboard acquisitions and.
Various markets, including Philadelphia, Phoenix and Atlanta.
As we look forward our capital decisions remain focused on digital conversions and continuing to invest in technology and helps grow revenues and.
For the tuck in acquisitions and.
Importantly, as we move forward and 2021 and our board will evaluate our outlook with regards to the reinstatement of the recurring come and dividend.
In closing we are pleased to be entering back into growth mode, and we think the economic backdrop supported by a strong balance sheet position us for an exciting year and.
And I've tried to exciting year ahead.
Turn the call back over to Jeremy.
Thank you, Matt and now, let's turn again and a bit more detail two.
Two of our outlook on slide 16.
But as I mentioned earlier, the second quarter outlook is dramatically improved with total revenue expected to be up and the mid to high 40 per cent range adjusted for the sale of sports marketing last year.
This growth will be led by Billboard which remains robust and we believe the well absolutely on track to be supporting 2019 levels towards the end of this year.
Transit ridership is still lagging and while relatively small in dollar terms, we do expect of 30% increase and revenues year over year in Q1.
That's the green shoots I mentioned earlier develop its likely that improvement and our transit recovery will be more backend loaded this year and continue into 'twenty 'twenty two.
The improvements and our business and our strong Q2 growth guidance is being achieved despite the fact that there are still many categories that simply on pack and the market.
If you turn to slide 17, you can see a graphic representation by category of the year over year revenue and each of the last three years first quarters.
What's really notes both of the very significant swings and some of our important large categories over this period of time.
If we look at the categories most impacted by the pandemic things like T V Entertainment movies travel casinos there.
Represented nearly half of our revenue decline tour and the first quarter.
The good news is that the reverse is true the post pandemic recovery will bring back all of these onto our books and.
And in fact, we're already seeing it and the movie category.
But the big films like fast and furious space Jam and the new James Bond later this year.
Just yesterday and line, but the majority of States, New York, New Jersey, and Connecticut announced the lifting of most pandemic restrictions on the maiden 19th.
Here and the city 24, a subway service is resuming on may 17th So as we leave this call today knows the we are firmly back into a positive growth environment.
As more and more of US are fully vaccinated case rates fall and as we move towards the summer months, then back to school and then date back to the office. We believe that we will continue to see more positive momentum in all parts of our business right across the country.
And from is extremely well positioned to meet the world's desire to dine out shopping the stores attend events and go on vacation.
And the market like this out.
Out of home will thrive to the benefit of our customers our people and all stakeholders.
So without all price huh, let's now open the lines for questions.
Thank you ladies and gentlemen at this time on the floor is open for your questions. If you would like to ask a question you may do so by pressing star one on your Touchtone phones now if you are using a speaker phone. Please make sure that your mute function is disabled 12 out of your signal to reach our equipment again, if you'd like to ask a question. Please press.
Star one now.
And our first question comes from Alexia QUADRA <unk> with J P. Morgan.
Hi, This is Dan.
And the encore.
Thank you so much for the question.
First I wanted to ask about how Q2 is trending on has visibility on at least on the Billboard side.
Probably now that Lamar noted this morning that they expect an improvement in Europe.
No I'm just wondering if you're seeing the same kind of increase on the belt right.
Thanks.
Yeah. Thanks on them and maybe just before we address that question I think when and I was talking about some you know the of transit revenue increase and Q2, I think I said Q1, and so that 30% increase was for Q2 just for clarity so let's sort of.
Question on AR.
And look in general obviously, but you know we're feeling a lot better about life full stop on our Billboard business and in particular on.
When we look into the detail of about pacings for Q2, and maybe it's helpful. Just to give a little bit of clarity and a week. We we have are about 50, Bill bull market and of those.
Over half of them actually and outpacing ahead of 29, two which is a really really good to see now to be fair you know the.
Tends to be all of smaller market saw smaller market have over the entire period outperformed some of our largest cities. So look but still you know, but one of.
At those levels, yet to New York or L, a or San Francisco, but it's a it's a really a really good sign and you know and I can on the repeat also the general positive feeling about and Ah.
And moving them.
Over on 19 levels as we got to and total as we get towards the backend.
Great. Thank you and just one follow up.
And in reference to the category and he'd listed on slide 17, which category and sort of dragging on.
And what factors include scaling through the year.
Well you know when we look at Q2 and you.
You know as we sit here today, you know obviously.
And most of our most of the growth in dollar terms is being driven by Billboard signed when we look at categories that are doing great liquor and beer financial legal and professional services and on retail and of old right up the and.
I guess the categories of still weak.
The ones that.
I spoke of outside on the cold and the T. V movies, we still don't have broad way I'm kind of on and Internet on the momentum is still weak and airlines and travel. So all of these we believe have the potential absolutely to snap back as the year progresses. So I think the.
And as they come back that will just be the who.
Hopefully a further tailwind for us.
Great. Thank you so much.
Thank you. Our next question comes from Ben Swinburne with Morgan Stanley.
Thanks, Good afternoon two questions.
And I apologize and Matt If you gave this and your comments and I might have missed it but you talked about the full year likely coming in ahead of your initial <unk> guidance.
Could you just comment on that if that's the.
Revenue, a comment or a cap ex comment or some combination and and sort of see you guys Didnt update it but I guess it sounds like you see upside anything you could add and then on the MTA you talked about reducing your spending any more color on sort of why is that of function of just ability to build this year or anything else you are Jeremy would like to add.
Add on the MTN relationship I'm sure people would love to hear and thank you.
Sure Ben.
Take those and the Jeremy can chime in.
And on the <unk> guidance, obviously, we just feel better about our busy.
The business overall, and then we did a couple of months ago, it's primarily from the Billboard.
Revenue was Jeremy pointed out it's progressing nicely transit is growing but still the ridership is and isn't there.
And I really didn't no no material change in capex of interest and so.
Revenue, bringing our bringing OIBDA of real along with it and we'll have hopefully more to say as the year progresses.
On the MTA.
We are in constructive I mentioned, but the.
Long duration conversations with the MTA.
We think we're making progress together if you recall back when we first signed up the contracted at a it's a long process, it's a complicated contract.
The MTA is a complicated place there's a lot of approvals and we have a lot of things going on and.
So we were hopeful we have a some new news soon but our our goal was really and.
And a modified and investment plane.
And extended duration of the contract and there's a lot of moving parts, but we think we'll get the.
That's something that we can announce.
Shortly.
Great. Thank you.
Thank you. Our next question comes from Ian Zaffino with Oppenheimer.
Okay, great. Thank you very much.
The 200, and Billboards and digital this year.
And so.
All of bike.
And on opportunities, you're seeing or is this sort of pumped.
Pumped up the non when you're trying to catch up Q4. So you don't deploy the COVID-19 that you wanted to.
Thanks, and I'll I'll I'll take that.
Before the.
Before the pandemic, we were at or around that one and 50 to 200, Mark So yeah.
Yeah, we we switched the tap off for a few months right at the start of the pandemic and switched it backhaul and really from Q3 last year and <unk>, but.
But it's more about really getting back to our previous level of that sort of 150 200, rather than any kind of massive pipelines spillover from from last year.
Okay.
And then just on the transit side.
How should we conceptually think of that that's the recovery happening and that that's great and cities reopening and that's great. But if you go back the full recovery I think they're talking about 2024.
But what do you actually need in terms of ridership to maybe capture the same revenues that you had in 2019 I know, it's not 100% because I know that impressions are on more valuable if there's lots of people on the subway and bus.
People in the <unk> and the stations or the kind of wanted to think of that and how you guys think about that.
And as the subway business starts recovering and the MTA business from Chicago.
Sure.
I mean, it largely depends on what model as Youre looking out as to exactly when we get back to 2019 levels, but what I can absolutely say is that as audiences rise so well advertising dollars were starting to see audiences come on.
And suddenly here and here in New York, We believe that will follow soon and D C Boston and San Francisco, which are on I think key franchises, while we have and Carl subway advertising, that's gonna be kind of natural consequence of and Ah.
And people getting out on the pounds eating out out friends of time out and suddenly back to the office the <unk>.
We don't the thing if we think you know what we're here and the city. So let's let's let's talk about let's talk about New York and.
We really don't the thing that we need that sort of five to 6 million daily advertisers back to get to 100%.
Of 2019 revenues.
And I guess the first thing is that we've you know, we've we all and the price of oil still of dramatically improving the advertising environment with our investments in digital which we think will drive revenues and we really believe that you know less crowded systems match, the a bit better brand.
For kind of Brent President of environment, sorry, full ramp brand engagement. So the it is it's all going to be Directionally positive, it's kind of take its kind of take longer than the Billboard.
But it's you know it's gonna be a good tailwind for us over the next balance of this year and into 2020 two.
Alright, great.
Appreciate the insights.
Thanks, Dan.
Thank you. Our next question comes from Stephan Bisson.
And that's what the Wolf research.
Good afternoon. Thanks for taking the question I was wondering could you talk about how the transit bi has changed how much lead time as necessary now that there's more digital and the system kind of come back more quickly as the environment recovers.
I think yeah, the short answer to that and.
And stuff on things as the and.
Absolutely, yes, and it's actually not just about our transit business.
On.
We talked about digital now being 22% of our revenues and that's only going to increase and kind of.
Digital is becoming bigger right the way across.
The portfolio.
And I think the fact that now.
Through automation and indeed, the programmatic pipes, we can certainly take money later.
And we were always seen as being a little bit and flexible as a medium we would difficult to buy and you have to book.
And also had that really isn't the case now you can actually lay down significant bonds with the and you know at the very short notice, which we think you know quite for us and indeed, the industry as a whole.
That's interesting and then I think on the last call. You noted that the M&A markets are a little bit tied up with pretty big valuation GAAP give any update on the market given the significant liquidity.
And you know we talked about some two or three small acquisitions that we executed and the first quarter and we've certainly got some.
More tuck ins and the pipeline and I think.
And because we go fruit.
And we did talk about there being a bit of a mismatch of valuate you know value expectation.
From sellers to potential buyers I think that seeming to on out a bit and and Ah. We expect the you know and.
And we'd like to see.
Some maybe some more.
More tuck in and as we go through the balance of this year.
Thanks, so much for taking the questions.
Thanks, a lot of them.
Thank you. Our next question comes from Jim Goss with Barrington Research.
Thanks, and got a couple of questions one is and.
Am I getting the sense that.
And we were thinking the that the early expectations during the onset of the pandemic that there would be a lot less office office space usage.
And more remote work.
But it's sort of something of that came up at the time that now maybe there'd be rethinking that and get back to anything close to normal or do you do you still think there would be a disparity and the future of relative to the past and survey and a related way.
If that were the case would that be bad for your urban properties that may be good for the billboards.
And the suburbs and outside of the city.
Thanks, Tim So let's take the.
I think the I think when we were sitting on the middle of the pandemic. It was really hard to say how things are kind of.
What we're going to play out I think from where we're all set and now the.
And what we're all here and the office and you know we've got.
A large number of our offices right the way across the country kind of almost back to and and but it comes back to back to normal and some of the big cities. You know there's been some reluctance, but we really believe those people get vaccinated.
We'll feel increasingly confident and in fact, they will have a desire to get out of the homes and I think that we will benefit from that as indeed will kind of all of the industry types and it's interesting to see and are coming from Jeremy Diamond just earlier today about what he thinks about.
And are working from home et cetera. So.
Look at it it may take a little while and certain markets and there may be some disparity across the country, but what we do have as you know we have assets in city centers, and we have assets and the bumps we confined our audience through our assets wherever they are so we feel as it is.
And hopefully indicated on the school and a very increased.
And the confidence about the balance of this year and we continue to believe that kind of.
Out of home and general as an industry as of.
We're gonna be of great way to impact of audiences and the future.
Okay and <unk>.
On the slide where you were looking at categories Entertainment and was probably the biggest drop off and and you said movies are coming back a little over the course of this process film release Windows have tightened quite a bit where it might be two or three weeks or maybe a little bit longer.
Except for the biggest blockbusters I'm wondering if that affects your business in terms of maybe having a bigger push in the shorter period of time and the third being a lot more turnover and that might well tie ins of the digital business or if it might be impacted and some other way do you of any thoughts on that.
Yeah, I think that's a good question, Jim and I.
Yeah, we will see we will see some of those buys shorten.
And just in absolute terms and also I think of unit.
They would desire of increasing flexibility, which is something that absolutely all of digital proposition can deliver and.
It's interesting right now because of some of these.
Categories.
And do stop coming back to put it like that.
Do expect to see some tension on some of our Billboard assets in terms of our inventory availability as we go through the balance of this year. So digital where you you you have that incremental.
The capacity can be a way that we might be able to satisfy that incremental demand.
Okay, and that could probably pressure prices and giving up the kennedy of that way too I would imagine.
Yeah, well as you can imagine you know the work what but yeah. It was sudden and you're trying to manage on a run supply and demand pretty carefully across our business at the moment.
Okay and my last question I was wondering about the bid process for the new transit contracts. There were several of that you had talked about before all of the rest of again and I'm wondering though where any of those stand and if it does are there some of that you're very focused on trying to win.
So you know as we look at them suddenly trumps it right now in terms of a major.
The major bids that really on that many that we expect to happen.
Within calendar year, 'twenty, one and the Washington was and was implied that actually got pushed out for a year or two and most of the all the transit franchises that we have you know have some longevity within the contract and right now there's no other major transit.
Franchise is up for bid that we expect to be tapped.
To happen as I said within this calendar year.
Alright, thanks very much appreciate it.
Thank you at this time, we have no further questions and the queue. So I'll turn it back to our speakers for closing comments.
So thanks, all price and thanks, everyone for joining us.
Today.
And we look forward to.
Speaking to you and the suing you.
And the investor events within the coming weeks. Thank you again.
Ladies and gentlemen that concludes today's presentation. Thank you for your participation you may now disconnect.
Uh huh.
And.
And.
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