Yahoo Finance Outfront Media Inc. (NYSE:OUT) Q1 2024 Earnings Call Transcript
Outfront Media Inc. (NYSE:OUT) Q1 2024 Earnings Call Transcript May 2, 2024
Outfront Media Inc. misses on earnings expectations. Reported EPS is $-0.16445 EPS, expectations were $0.14. OUT isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, everyone and welcome to the OUTFRONT Media First Quarter 2024 Earnings Call. My name is Henry and I will be your conference operator today. [Operator Instructions] It’s now my pleasure to hand you over to Stephan Bisson to begin. Please go ahead.
Stephan Bisson: Good afternoon, and thank you for joining our 2024 first 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 slide presentation that you can find on the Investor Relations section of our website, outfront.com. After today's call has been 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 2023 Form 10-K and our March 31 2024 Form 10-Q, which we expect to file.
We will refer to certain non-GAAP financial measures on the 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 of prior period reconciliation. Let me now turn the call over to Jeremy.
Jeremy Male: Thank you, Stephan and thank you, everyone for joining us this afternoon. We're pleased to share our first quarter results detail, which came in broadly as we expected when we last spoke in February. As you can see on Slide 3, which summarizes our headline numbers, the year is off to a solid start with total consolidated revenue growing 3.2% during the quarter reflecting steady growth in billboard and impressive return to growth in transit. Adjusted OIBDA was up more than 10% year-over-year, driven by healthy improvements in both billboard and transit, much of this improved OIBDA converted to AFFO, which more than doubled to $23 million in our seasonally smallest quarter. Slide 4 shows our segment results, with total US media revenue increasing 3.5% year-over-year.
Other was down 2.6%, given much lower digital equipment sales during the quarter, which offset solid Canadian revenue growth 5.7%. On Slide 5, you can see our US media revenues in more detail. Billboard revenues were up 2.5% but would have been higher if you take into account condemnation revenues from both periods that we highlighted on our last call in February. Local continues to perform exceptionally well, with particularly strong performances Atlanta Dallas and signs of recovery in San Francisco. Further our recently acquired assets in Portland that picked up a nice head of state. Transit revenue was up 7.7% versus the prior year. The improved revenues in transit were led by the MTA and broad-based in nature, driven both by local and national, a wide array of ad categories spanning across all regions.
The breakdown of our local and national revenues in our US business can be seen on Slide 6. As in recent quarters, local was the primary driver of growth, up 7.5% during the quarter, while national declined by 2.3%, primarily due to weaker billboard trends in a couple of our larger markets. Given this our local national split of 62% to 38% was more skewed towards local than the more typical 55%, 45%. On a consolidated basis, our best performing categories in the first quarter were legal services, retail, service providers, government political and entertainment. On the weaker side were also utilities, real estate, travel and health and medical. Slide 7 illustrates our solid US billboard yield growth, up 3.3% year-over-year reaching just under $2600, a first quarter record.
The largest drivers of this yield growth remain our digital conversions rate and higher automated transaction revenue. Slide 8 highlights our strong digital performance with revenue growing 8.3% in the quarter, representing 31% of our total revenues, up from 30% last year. Digital billboard was up 5.6% while Transit was up 16.7%, obviously fueled by the MTA. Automated revenues in the quarter represented 14% of our digital revenues in the quarter, up from 8% in last year's comparable quarter. With that, let me now hand it over to Matt to review the rest of our financials.
Matthew Siegel: Thanks, Jeremy, and good afternoon, everyone. For a deeper dive into our financial statements, please turn to slide 9 for more detailed look at our expenses. Total expenses were up about $6 million or just under 2% year-over-year. Billboard lease expense was essentially flat in the quarter versus last year. Excluding the impact of the $5 million out-of-period adjustments in the first quarter of last year, Billboard lease expense was up in the low to mid-single-digits. This growth was driven by annual escalators included in our fixed rent leases and properties added to our portfolio in 2023. Transit franchise expense was down slightly versus the prior year, given the non-renewal of a loss-making contract and a small benefit from amendments to existing Transit agreements, which combined more than offset higher MAG payments for the MTA related to the annual CPI adjustments.
Posting maintenance and other expenses was up 6% versus the prior year, primarily due to higher compensation related expenses, utilities costs, maintenance expenses which were impacted by some timing items and other costs related to higher business activity. SG&A expense was flat during the quarter as the increases related to higher compensation related expenses were offset by lower expenses elsewhere in the business. Corporate expense was up just over $3 million due to higher professional fees and the unfavorable impact of market fluctuations on an unfunded equity index-linked retirement plan. The higher professional fees are principally related to a management consulting project. Slide 10 provides additional detail on the sources of OIBDA.
Total OIBDA was up approximately 10% to $66.5 million. US Billboard OIBDA was just over $97 million and US Billboard OIBDA margin was 30.9%, up 60 basis points year-over-year. For the full year, we continue to believe that billboard margins will be slightly up on an annual basis. Transit OIBDA was a $15.3 million loss compared to last year's loss of $20.5 million. The improvement was primarily due to the better revenue, as Jeremy described earlier in the call. Turning to capital expenditures on slide 11. Q1 CapEx spend was $18.4 million, including just under $5 million of maintenance spend, both lower than last year. The reduced CapEx was primarily due to the timing of our expected spend this year, and we continue to believe that we will spend approximately $75 million of total CapEx this year with about $70 million of that on our US business.
We added 35 Digital billboards in the US this quarter, increasing our US total to just over 1,900. We continue to target 150 to 200 total Digital billboard additions for the full year. On the transit side, we added over 2,500 digital displays in the US in Q1, mostly small format screens on subway and train cars in the New York MTA. Looking forward, we are nearing the end of the deployment phase for New York and expect to substantially fulfill our initial build obligation this year, bring us into the maintenance phase of the contract beginning in 2025. Now turning to AFFO on slide 12. You can see the bridge to our Q1 FFO of just over $23 million. The $14 million year-over-year increase was due to improvements in OIBDA, maintenance CapExm cash taxes and other, slightly offset for higher interest expense.
For 2024, we continue to expect that reported consolidated AFFO growth will be in a high-single-digit range from 2023’s AFFO of $271 million. As we noted in February, this guidance assumes the June 30th close on the sale of our Canadian business. Please turn to slide 13 for an update on our balance sheet. Committed liquidity is approximately $570 million, including around $40 million of cash, nearly $70 million available on our revolver and $30 million available via our accounts receivable securitization facility. As of March 31, our total net leverage was 5.4 times flat compared to December 31. We expect our leverage to move down meaningfully as the year progresses given the seasonality of our business, and upon the close of the sale of our Canadian business.
Turning to our dividend, we announced today that our Board of Directors approved a $0.30 cash dividend payable on June 28 to shareholders of record at the close of business on June 7. As a reminder, based on our current operational expectations and the taxable gain created with the sale of our Canadian business, we believe we will need to pay a larger dividend later in the year for weak compliance. We spent $6 million on tuck-in acquisitions during the quarter. In looking at our current acquisition pipeline, we continue to expect our 2024 deal activity to look similar to that of 2023. In closing, 2024 is still rough as we expected, and we remain enthusiastic about the remainder of the year to come. With that, let me turn the call back to Jeremy.
Jeremy Male: Thanks, Matt. We were pleased with our first quarter performance, particularly with that of transit, which returned to solid growth after what proved to be a rather difficult 2023. Looking forward to the second quarter and based on our trends of today, we estimate the Q revenue growth will be broadly in line with Q1s, both in terms of scale and also shape between billboard and transit. Before ending the call today, I'd quickly like to discuss our high level transit strategy, as there were a couple of events during the quarter that exemplify our current approach to this important business. First, Matt mentioned that transit franchise expense was down during the quarter due to the non-renewal of an unprofitable transit franchise, as well as small benefit related to a transit contract amendment.
While both of these were relatively small on a gross dollar basis, they illustrate our commitment to improving these business partnerships and growing them profitably for both parties, or exiting if such agreement cannot be struck. Another example of our transit strategy that I would like to highlight is our new long-term contract with WMATA in Washington, D.C., which was selected by the agency through an open RFP process and include terms which better reflect the current state of the transit advertising market. It has improved financial metrics relative to the prior long-term contract signed back in 2014, with a lower revenue share taken net of certain expenses, a floating minimum annual guarantee, and no capital obligations. We believe this new contract provides the appropriate framework for what we're calling sustainable transit advertising partnerships.
The additional flexibility provided by the structure of this type of contract allows its terms to adapt to advertising trends as they change. This enables us and our partners to minimize franchise financial risk while capitalizing on future revenue opportunities as transit continues to rebound. And with that operator, let's now open the lines for questions.
Operator: Certainly. [Operator Instructions] Our first question today is from the line of Cameron McVeigh of Morgan Stanley. Please go ahead, your line is open.
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