Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- US media business grew revenues by 4%, driven by steady growth in billboards and double-digit growth in transit.
- US media adjusted EBITDA increased by nearly 10%, with consolidated AFFO growing 9% to $85 million.
- Digital performance was strong, with US media digital revenue growing 10% and representing over 34% of total revenues.
- US media billboard yield grew almost 4% year over year, reaching a new second-quarter record.
- The sale of the Canadian business improved the company's balance sheet, reducing net leverage from 5.4 times to 5 times.
Negative Points
- West region, particularly Los Angeles, experienced a decline due to soft media spend.
- National revenue growth was slower compared to local, with entertainment being a significant drag.
- US media SGA expenses increased by 9% due to higher compensation-related expenses and one-time severance costs.
- Total US media expenses were up by over $5 million, driven by higher maintenance and utilities costs.
- The company expects to incur additional consulting fees, with total costs projected to reach $8 million by the third quarter.
Q & A Highlights
Highlights of Outfront Media Inc (OUT, Financial) Q2 2024 Earnings Call
Q: Can you elaborate on the Q3 media growth guidance and the reception of programmatic and automated buying in New York MTA?
A: We expect Q3 US media revenue growth to be comfortably in the mid-single-digit range, with billboard and national trends improving. Programmatic buying for MTA live boards has been switched on, and while it will take time, we are optimistic about the potential for automated revenues.
Q: How is the current macro environment affecting advertiser demand, particularly the divergence between local and national advertising?
A: The divergence is not significantly driven by macro trends but rather by specific sectors like entertainment, which have not fully recovered. National advertising is growing, just not as fast as local advertising.
Q: What factors are driving the strong growth in the digital transit segment?
A: Growth is driven by an increase in digital screens in the MTA and the integration of programmatic ad tech. The product quality and the ability to deliver timely, creative content are also contributing factors.
Q: How is the transit segment performing given the current ridership levels, and what are the expectations for future revenue growth?
A: MTA revenues are well ahead of ridership growth, and we believe that at 80-85% of pre-COVID ridership, we can generate 100% of revenue. The expansion is driven by product quality and advertiser acceptance of transit advertising benefits.
Q: Can you explain the mechanics and timing of potentially paying dividends in stock?
A: As a REIT, we can pay up to 80% of a declared dividend in stock. Shareholders would choose between cash or stock, with excess allocated pro-rata. This approach has been used by other REITs and may involve a reverse split to standardize shares.
Q: How should we model the Canadian disposition, given it closed on June 7 instead of June 30?
A: The financials reflect the 67 days we owned the Canadian business. Performance during this period was lower than last year, making the Canada comparison challenging.
Q: How is the Los Angeles market performing post-writer's strike, and what are the expectations for recovery?
A: TV ad spend is returning, but the movie slate for Q3 is lighter compared to last year. Full recovery in the entertainment sector may not occur until 2025.
Q: Are there any lingering impacts from work-from-home trends on ad exposure or pricing in urban areas?
A: Work-from-home impacts the total number of eyeballs but not the reach. We are not seeing significant lingering impacts, and ridership is expected to gradually increase, benefiting from our digital investments.
Q: Will the sale of the Canadian business impact your capital plans or M&A focus?
A: The sale improves our leverage range, giving us more flexibility and balance sheet strength, potentially accelerating our return to material M&A opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
