Outfront Media Q3 2019 slides: double-digit growth fueled by digital transformation

Outfront Media Inc. (NYSE:OUT), a leading out-of-home advertising company, presented its third quarter 2019 results on November 4, 2019, showcasing strong double-digit growth across its business segments. The company’s strategic focus on digital transformation is yielding significant results, with digital revenue growing at nearly 28% year-over-year.

Quarterly Performance Highlights

Outfront Media reported total revenue of $462.5 million for Q3 2019, representing an 11.7% increase compared to the same period in 2018. This marks the company’s fourth consecutive quarter of double-digit growth, demonstrating consistent execution of its growth strategy.

U.S. Media, the company’s largest segment, generated $422.7 million in revenue, up 11.3% year-over-year, while the Other segment contributed $39.8 million, growing 15.4% compared to Q3 2018.

As shown in the following chart of quarterly revenue growth:

Within the U.S. Media segment, billboard revenue reached $292.8 million, growing 7.9%, while transit and other revenue showed exceptional performance at $129.9 million, up 19.8% year-over-year. This balanced growth across different advertising formats highlights the company’s diversified revenue streams.

The following breakdown illustrates the strong performance across billboard and transit segments:

Outfront Media also demonstrated balanced growth across both local and national advertising. Local revenues increased by 12.2% to $229.1 million, while national revenues grew by 10.4% to $193.6 million. This balanced performance suggests broad-based strength across different advertiser categories.

Digital Transformation Strategy

Digital revenue emerged as a standout performer, growing 27.9% year-over-year to reach $93.4 million in Q3 2019. This acceleration in digital revenue growth underscores the success of the company’s digital transformation strategy.

The following chart illustrates the significant progress in digital revenue:

Billboard yield increased by 9.4% to $2,333, with digital revenue mix expanding to 20% of total billboard revenue, up from 18% in the prior year period. This improvement in yield reflects the company’s ability to generate higher revenue per display through digital conversion.

A key component of Outfront Media’s digital strategy is its New York MTA deployment. During Q3 2019, the company deployed 900 digital displays across subway and commuter rail locations, bringing the total deployment to 3,668 displays. Of these, 555 are currently generating advertising revenue, with more expected to come online in future quarters.

The following slide details the progress of the NY MTA deployment:

Financial Analysis

Despite the strong revenue growth, expenses increased by 13.1% to $322.2 million, slightly outpacing revenue growth. As a percentage of revenue, expenses increased marginally from 68.8% to 69.7%. This was primarily driven by higher transit franchise expenses, which grew 20.8% year-over-year due to the expansion of transit advertising initiatives.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) grew 8.5% to $140.3 million, as illustrated in the following waterfall chart:

Adjusted Funds From Operations (AFFO), a key metric for evaluating the company’s ability to pay dividends, increased by 7.2% to $92.6 million. The components contributing to this growth are detailed below:

The company’s dividend payout ratios improved significantly, with the ratio to Adjusted Free Cash Flow decreasing from 111% in Q3 2018 to 86% in Q3 2019, and the ratio to AFFO improving from 72% to 63%. This improvement suggests enhanced dividend sustainability.

Capital expenditures increased to $25.8 million in Q3 2019 from $15.7 million in Q3 2018, with growth capex accounting for $19.4 million of the total. This reflects the company’s continued investment in digital infrastructure and new display technologies.

From a balance sheet perspective, Outfront Media maintained solid liquidity with $476.3 million available as of September 30, 2019. The company reported a net leverage ratio of 4.6x and a weighted average cost of debt of 4.9%.

Forward-Looking Statements

Looking ahead, Outfront Media expects continued revenue growth in Q4 2019, driven by its ongoing digital transformation initiatives and strong performance across both billboard and transit advertising segments.

The company highlighted several growth drivers for the future, including:

1. Enhanced salesforce capabilities through specialized teams, improved training, and performance incentives

2. Accelerated digital transit deployment with new product offerings

3. Increased pace of digital billboard deployment

4. Potential acquisitions, noting that 20% of U.S. billboard inventory in top 25 DMAs is held by independents

5. Technology investments in audience analytics, automation, and proprietary solutions

As shown in the company’s outlook slide:

Outfront Media’s Q3 2019 results demonstrate strong execution of its growth strategy, particularly in digital transformation. With double-digit revenue growth, improving financial metrics, and strategic investments in digital infrastructure, the company appears well-positioned to capitalize on the evolving out-of-home advertising landscape.

Full presentation:

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