Q3 2022 OUTFRONT Media Inc Earnings Call

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Hello, and thank you for joining be out from Q3 2022, adding scope the cold we'll be beginning shortly so please do stay on the line I don't think key for your patients.

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Hello, and welcome to the out front Q3, 'twenty to 'twenty two earnings call My.

My name is Josh and I will be a coordinator for today's event.

Please note that this conference is being recorded for the duration of the cold fill lines will be on listen only however, you want to have the opportunity to ask questions at the end of the call. This can be done by pressing star one anytime on your telephone keypad to register your question.

If you require assistance at any point, Please press star zero and people will be connected to an operator.

I will now hand, you over to your highest stephane disarm to begin thank you.

Good afternoon, and thank you for joining our 2022 third quarter earnings call.

With me 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 the lines for a question and answer session.

Our comments today will refer to the earnings release and a slide presentation that you can find on the Investor Relations section of our website upfront media dotcom.

After today's call has concluded a replay will be available there as well.

This conference call May include forward looking statements relevant factors that could cause actual results to differ materially from these forward looking statements are listed in our earnings materials and in our SEC filings, including our 2021 Form 10-K, and our September 30th 2022 Form 10-Q, which we expect to file tomorrow.

We will refer to certain non-GAAP financial measures on this call.

Any references to OIBDA made today will be on an adjusted basis.

Reconciliations of OIBDA and other non-GAAP financial measures are in the appendix of the slide presentation. The earnings release and on our website, which also includes presentations with prior period reconciliations. So let me now turn the call over to Jeremy.

Thanks, Stephane and thank you everyone for joining us today.

We're pleased to be here sharing our third quarter results and reporting another strong quarter of double digit growth.

Comfortably in line with the guidance, we provided three months ago.

Advertiser demand continues to be robust driving billboard yields to another quarterly record and pushing further recovery in transit as writers returned to the rails in buses in greater numbers post labor day.

Starting with our headline numbers on slide three you'll see the total consolidated revenue grew nearly 14%, including our acquisition in Portland.

This revenue growth led to a 15 million year over year improvement in OIBDA, and <unk> 8 million improvement in <unk> during the quarter.

We can go back for phone and without wishing to steal your best lines, Matt with this results and the trends we're seeing in Q4, we believe we're right on track to achieve the 60% growth we guided to for the year.

U S media revenues in more detail.

Billboard grew over 12% with strong performances in all regions that we should call out New York, and Miami as being particularly striking.

Nearly every category in Billboard was up year over year with significant strength coming from auto entertainment.

<unk> and.

In retail.

Transit revenue was up 19% versus the prior year, continuing it steady improvement towards returning to 2019 levels a subway route and the bus ridership increases.

The breakdown of local and national revenues and R. U S business can be seen on slide six.

While we continue to see strength in both parts of the business National growth was ahead of local again this quarter up 20% year over year compared to locals 9%.

This returns us to our historic splits a 45 per cent national and 55% local.

Slide seven shows are healthy U S Billboard yield growth, which grew 11% year over year.

Just over $2700.

That's just been the trend throughout the year.

Yield growth was principally driven by rate, reflecting continued robust advertise to demand for our premium inventory, particularly in major markets.

Slide eight highlights are strong digital performance with revenue growing 27% in the quarter and representing nearly 30% of our total revenue up from 27% last year.

This growth continues to be driven by three main factors.

Hi yields resulting from improve rights.

Increased inventory as we convert two additional digital boards.

And early steps and programmatic, which remains a small but growing parts of our business.

As you can see Bilbo digital grew a healthy 20 per cent in transit digital grew an outsize, 51% to $34 million.

The largest driver about Israel transit rather news continues to be the New York empty I will be installed around 400 displays during Q3, increasing our title to over 9400 installed digital advertising displays since renewing a contract in 2017.

Let me know hundred over to Matts review, the rest of our financials.

Thanks, Jeremy and good afternoon, everyone. We appreciate you joining our call today.

Please turn to slide nine for more detailed look at our expenses.

No expenses were up $40 million or 14% year over year.

As was the case in the first half of the year.

Strong revenue growth has led to increases in a variable in performance related costs.

Double the least expense was up 12% year over year in Q3, including new locations and he can also primarily reflecting higher variable expense on the portion of our billboards that contained revenue share agreements.

These boards are primarily located in our major cities and reflect a significant growth that we show in New York and other markets that Jeremy mentioned earlier.

Transit franchise expanse is usually a revenue share expense it was up 22% due to higher revenues, but also due to the higher Meg Oh to the MTA from our 2020 deferral and inflation increase for this year.

Hosting maintenance another expense was up 19% given additional activity.

Results from our higher revenue increased compensation for our operations employees and additional discretionary maintenance spent.

Corporate and SG&A expands combined increased 7% versus last year.

This reflects growth in revenue annoying, but ER driving increases in performance based sales related costs.

Other compensation costs higher provision for doubtful accounts and increase travel and entertainment expenses.

These increases would partially offset by the favorable impact of market fluctuations on an unfunded equity index linked retirement plan.

On Slide 10, you can see I've only been out for the quarter is up $15 million from last year and represents a margin of 27%, which is relatively flat 10 basis points versus last year.

So at 11 provides additional detail on their sources and growth avoid bitter.

U S. Billboard OIBDA grew 11% to $128 million.

Billboard Open a margin was 38% down 40 basis points versus a year ago, but up nearly 150 basis points versus 2019.

Right margin declined versus 21 were driven by some one time items affecting comparability in or out.

Performance in New York, Los Angeles, and Miami, which are high revenue, but relatively lower margin markets.

We remain confident that Billboard margins will expand as we move forward given the operating leverage provided by the largely fixed costs nature of our leases.

And an increasing proportion of digital revenues.

Transitory, but remained essentially breakeven is our increase in revenue, particularly at the New York N Ta was offset by a higher minimum annual guarantee payments as.

As a reminder.

We expect to be paying the minimum annual guarantee we can for the New York and Ta franchise expense on a straight line basis throughout the year.

Given this we expect to see a strong queue for a benefit to reported OIBDA in 2022 as we did in 2021 due to seasonal peak revenue in the fourth quarter.

Turning to capital expenditures on slide 12.

Q3, capex spend with $25 million, including $8 million a maintenance spent.

The 9 million dollar increase in total capex versus the prior year <unk>.

Primarily due to digital investments.

Your date, we have increased our total digital Billboard count to over 1800.

250, or 16% versus Q3, 21 through conversions, new developments acquisitions and management agreements.

Looking to have a phone. So I'd 13, you can see her Q3, a in the fall of $87 million improved by $8 million a year over year as our OIBDA growth, which partially offset by the higher maintenance capex cash interest in other below the line items.

Jimmy mentioned earlier, we remain confident in a full you got into the 60% growth and a F F O.

Please turn to slide 14 for an opinion on a balance sheet.

Committed liquidity is approximately $725 million, including over $80 million of cash almost $500 million available via a revolver and $150 million available by our accounts receivable securitization program.

As of September 30th or total net wherever it was 4.9 times.

We remain very comfortable with our debt stack with our next maturity not being until mid 2025 in less than 25% of total that subject of floating rates.

Lastly, we announced today that a board of directors has declared a 30 cent cash dividend payable on December 30th shareholder record at the close of business on December 2nd.

We completed $30 million of acquisitions in the quarter and expect to close a few more tuck into this year funding these deals with cash on hand in Georgia.

Iridization facility is necessary.

By the time 2022, n's it'll be most acquisitive years since 2014.

Looking at our current condition pipeline, we expect our deal activity to moderate in 2023.

In closing Q3 was a solid quarter or around we remain confident in our business for the remainder of the year.

With that let me turn the call back to Jeremy.

Thanks Bye.

While that continues to be significant volunteer, let's say in the financial markets and much has been written and seen regarding potential advertiser cautiousness within other mediums.

Well not currently saying, that's an outdoor and our business remains healthy on all fronts.

Well you, obviously understand we're not in a vacuum but when looking at Q4, we expect we'll have another quarter.

Based on trends as of today, we estimate the queue for a total revenues will grab in the mid to high single digit range with Billboard in transit growing it's similar rights.

We remain confident in the strength. We are currently sitting in a business. It is broad based both geographically and by category.

And it was interesting to see the strength reflected in Magnus recently revised U S advertising forecast.

And that's September update report Magna increase that out of high revenue forecasts for both the second half of 2022.

Full year of 2023, despite richardson their forecasts for the test lab market.

And in fact magnet expects out of home will be the second largest growing advertising medium and 2023.

Growing at 8% compared.

Compared to total advertising, which is expect to grow at 5% next year.

But we all understand the media forecasting is not an exact science, but directionally. This is positive for out of home and simply putting the math together.

Just that out of home is expected to take additional shot of the total advertising pie.

Expect that out front will as well.

We believe there is some good reasons for this.

First investments and digital conversions.

The digital transit build out and focus on digital creative innovation all allow for spectacular visual advertisement.

With unprecedented flexibility that are creating new excitement among advertisers.

Second.

Orients measurement data provides audience metrics and targeting capabilities and the attribution solutions connect the campaigns through to a variety of K P eyes.

Third programmatic and other automated platforms are small, but growing and enable more frictionless buying and inclusion and omnichannel campaigns.

And fourth.

Outdoors value proposition of mass reach high frequency and cost efficiency is further posted by being brand safe fraud free free while meeting consumers outside of their homes.

Gage and real world activities.

We've worked hard on these initiatives both it out front, but also as an industry as a whole.

Pleased to see that work paying dividends today.

And with that operator.

Now open the lines for questions.

Thank you very much.

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We do have a question on the line and it comes from the line <unk> from.

From J P. Morgan. Please go ahead.

Great I'd like to follow up on the four Q guidance and what's driving the strength four two segments for Billboard.

Different drivers.

Drivers there.

Local or national advertising, that's kind of more in the fourth quarter.

Thanks for the question rich.

Look for the for the most part was saying much of the same you know as we have throughout the year broad based growth across all of our markets and categories and suddenly increasing appetite for trumpeted as we go forward, which is great. If we sort of look into some of the categories. Obviously this is so.

Need a point in time, but you know Fred as travel is currently pricing up 78%.

Four Q for fashion as strong.

Otto strong at 33% medical retail so generally right across the board positivity and it's interesting because if you dig into the guidance in sort of a thing to think about it on a on a kind of relative basis, it actually implies that.

Accelerating growth in queue for versus 2019, you know as I improve growth I'm resorting Q2, and Q3. So that's that's really good to see and again you know we feel very good about where our businesses right now.

And just to follow up there it seems like.

Your ability to take price.

Your premium AD space, that's helping drive that.

Yeah absolutely.

You know we've had some great yield growth right the way through the year and you know that continues to be the case in queue for and as mentioned you know the.

Majority of that is about increasing rates, which.

<unk>, obviously strong demand from advertisers.

Great. Thank you.

Thank you very much.

To us.

You would like to ask a question. Please press stop on on your telephone keypad now place [noise].

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Okay. It looks like we've got another question on the line. It comes from the line of <unk> from the bank.

Sorry.

Just a few quick questions for me.

Can you remind me how.

How much more than the federal payments.

To make on the mat.

Our leftover from the pandemic.

Sure, we we differed from 2020.

Ah.

You know, it's gonna go into 22 through 2026, but.

About 11, and a half a million dollars a year to about 50 $657 million.

Okay got it.

And based on some of the ridership.

You're seeing in the advertiser.

Reaction to that.

Your market.

Is it your expectation that an twenty-three and going forward that you'll you'll be performing above the mag levels.

We think certainly did some time during the year and 23.

Will be above the Mag when you see are cute tomorrow.

See we shifted some a small portion of our deployment the investment in any MTA into short term, implying we expect to start a little bit of recouping in 2023.

Okay got it that's great.

I appreciate the time.

Yeah sure thing thanks.

Further questions on the line as tall hunchback after the speakers.

Thanks, Josh and thanks to everyone for joining us on the call today.

I hope to see and meet with many of you at the various conferences and events. This winter, but for those that I don't I look forward to presenting a cue for results to you in February thanks again.

Thank you very much for joining today's cool he may now disconnect.