OUTFRONT Media (OUT) Q3 FFO Lags, Revenues Beat Estimates
Zacks Investment Research | Nov 04, 2019 09:27PM ET
OUTFRONT Media (NYSE:OUT) reported third-quarter 2019 adjusted funds from operations (FFO) per share of 64 cents, missing the Zacks Consensus Estimate of 65 cents. However, the reported figure improved from the prior-year quarter tally of 61 cents.
Solid top-line growth in national and local advertising in the United States aided the company’s performance. Also, the adjusted operating income before depreciation and amortization (adjusted OIBDA) was up 8.5% year over year. Nonetheless, mounting transit franchise cost and billboard lease expenses hurt results to some extent.
Revenues came in at $462.5 million, beating the Zacks Consensus Estimate of $460.6 million. The revenue figure also climbed 11.7% year over year.
Quarter in Detail
Billboard revenues came in at $312 million, indicating year-over-year increase of 7.4%. This upside resulted from higher average revenue per display, which is referred as yield, and increased revenues from digital-billboard conversions.
Transit and other revenues of $150.5 million were up 21.8%, year over year. Growth in revenues from digital displays, improvement in yield, rise in third-party digital equipment sales and the net impact of won and lost franchises during the third quarter resulted in this upswing.
However, operating expenses of $245.5 million flared up 14% year over year. This upsurge mainly resulted from elevated transit franchise expenses, higher billboard lease expense and escalation of posting, maintenance and other expenses.
Nevertheless, operating income improved 8.4% to $85.5 million in the reported quarter backed by solid revenues, from the $78.9 million reported in the prior-year quarter.
Net cash flow, resulting from operating activities for the nine-month period ended Sep 30, 2019, came in at $162.1 million, up 18% year on year. Results primarily reflect the impact of higher net income. However, the reported tally was partly offset by higher pre-paid equipment deployment costs associated with the company's transit franchise agreement with New York Metropolitan Transportation Authority.
As of Sep 30, 2019, OUTFRONT Media enjoyed a solid liquidity position, which comprised unrestricted cash of $58.3 million and $413 million of availability under its $430-million revolving credit facility, net of $2 million of issued letters of credit.
Our Take
OUTFRONT Media’s top line put up an impressive performance in the September-end quarter, aided by higher revenues from solid national and local U.S. advertising. Further, management expects revenue growth to reach double digits in 2019, backed by digitization, sales execution, and growth of out-of-home (OOH) in advertisers’ media mix. The company has been fortifying its billboard portfolio through digital conversions and strategic acquisitions, which augurs well for long-term growth. Nonetheless, rise in billboard lease expense, and higher posting and maintenance expenses remain concerns for the company.
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