OUTFRONT Media(OUT) - 2021 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q3 2021 financial statements reflect significant revenue recovery, profitability, and shifts in cash flow dynamics Consolidated Statements of Financial Position Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $510.3 | $710.4 | | Total current assets | $801.2 | $974.7 | | Goodwill | $2,077.8 | $2,077.8 | | Total assets | $5,783.4 | $5,896.9 | | Liabilities & Equity | | | | Total current liabilities | $476.8 | $534.9 | | Long-term debt, net | $2,619.3 | $2,620.8 | | Total liabilities | $4,459.4 | $4,513.2 | | Total equity | $1,324.0 | $1,383.7 | | Total liabilities and equity | $5,783.4 | $5,896.9 | - Total assets decreased slightly from $5.90 billion at the end of 2020 to $5.78 billion as of September 30, 2021, mainly driven by a decrease in cash and cash equivalents[9] Consolidated Statements of Operations Key Operating Results (in millions) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $399.2 | $282.3 | $999.4 | $900.5 | | Operating Income | $65.0 | $25.1 | $63.1 | $33.0 | | Net Income (Loss) attributable to OUTFRONT | $33.1 | $(13.5) | $(35.5) | $(65.3) | | Diluted EPS | $0.18 | $(0.14) | $(0.39) | $(0.54) | - The company showed strong recovery in Q3 2021 with total revenues increasing by 41.4% YoY to $399.2 million, swinging from a net loss of $13.5 million in Q3 2020 to a net income of $33.1 million[11] - For the nine months ended September 30, 2021, revenues grew 11.0% YoY, but the company still recorded a net loss of $35.5 million, though this was a significant improvement from the $65.3 million loss in the same period of 2020[11] Consolidated Statements of Cash Flows Cash Flow Summary for Nine Months Ended Sep 30 (in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash flow provided by operating activities | $45.1 | $86.0 | | Net cash flow used for investing activities | $(106.5) | $(35.1) | | Net cash flow provided by (used for) financing activities | $(140.5) | $581.0 | | Net (decrease) increase in cash | $(201.7) | $631.3 | - Cash from operating activities decreased by nearly half to $45.1 million for the first nine months of 2021 compared to $86.0 million in the prior year period, partly due to an increase in receivables[23] - Financing activities resulted in a net cash outflow of $140.5 million in the first nine months of 2021, a stark contrast to the $581.0 million inflow in the same period of 2020, which was boosted by proceeds from debt and preferred stock issuances[23] Notes to Consolidated Financial Statements - The company operates as a REIT, providing out-of-home advertising displays in the U.S. and Canada through two segments: U.S. Media (Billboard and Transit) and International[28] - In Q3 2020, the company sold its Sports Marketing operating segment for approximately $34.6 million in cash[29] - The company's debt structure includes a term loan, several series of senior unsecured notes, and revolving credit facilities. In Q1 2021, the company issued $500.0 million of 4.250% Senior Unsecured Notes due 2029 and used the proceeds to redeem its 5.625% notes due 2024, resulting in a $6.3 million loss on extinguishment of debt[55][65][66] - Under its agreement with the MTA, the company is obligated to deploy thousands of digital displays. As of September 30, 2021, 9,180 digital displays had been installed. The initial 10-year term of the MTA agreement was extended to 13 years in July 2021[115][116] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q3 2021 performance to advertising recovery, driving revenue and Adjusted OIBDA growth, alongside digital investment and pandemic risk management Overview and COVID-19 Impact - The company is a REIT and one of the largest out-of-home advertising providers in the U.S. and Canada, with a portfolio focused on top markets like New York City and Los Angeles[131][133] - The COVID-19 pandemic continues to impact the business, particularly in major transit hubs, but the company has seen incremental improvement and expects this to continue through 2021, though not yet back to pre-pandemic levels[137][138] - In response to the pandemic, the company has focused on preserving financial flexibility and managing costs, but has resumed measured capital investments and selective acquisitions[140][141] Business Environment and Key Performance Indicators - Increasing the number of digital displays is a key organic growth strategy. In the first nine months of 2021, the company built or converted 59 new digital billboards and 1,829 digital transit displays[146][148][149] Key Performance Indicators (in millions) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $399.2 | $282.3 | $999.4 | $900.5 | | Organic Revenues | $399.2 | $283.2 | $999.4 | $877.8 | | Adjusted OIBDA | $108.1 | $59.4 | $189.2 | $150.3 | | AFFO | $79.0 | $27.7 | $94.1 | $46.4 | - Adjusted OIBDA, a key management metric, increased 82% in Q3 2021 and 26% in the first nine months of 2021 compared to the same periods in 2020[157] Analysis of Results of Operations Revenue Growth Analysis (in millions) | Revenue Type | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Billboard | $317.4 | $239.9 | 32% | | Transit and other | $81.8 | $42.4 | 93% | | Total Revenues | $399.2 | $282.3 | 41% | - Q3 2021 revenue growth was driven by a recovery in customer advertising spend, with Billboard revenues up 32% and Transit and other revenues up 93% YoY[175][177] - Operating expenses increased 28% in Q3 2021, primarily due to a 130% rise in Transit franchise expenses, which were driven by higher guaranteed minimum annual payments to the MTA and increased revenues[179][181][183] - SG&A expenses rose 36% in Q3 2021 compared to the prior year, mainly due to higher compensation-related expenses and professional fees[185] Liquidity and Capital Resources - As of September 30, 2021, the company had $510.3 million in cash and cash equivalents, down from $710.4 million at the end of 2020[215] - In January 2021, the company issued $500.0 million of 4.250% Senior Unsecured Notes due 2029 and used the proceeds to redeem its 5.625% notes due 2024, lowering its weighted average cost of debt to 4.3% from 4.5%[223][232][235] - The company expects full-year 2021 capital expenditures to be between $70.0 million and $75.0 million, excluding MTA equipment deployment costs, which are expected to be approximately $100.0 million for the year[249][221] - The company is in compliance with its debt covenants as of September 30, 2021, with a Consolidated Net Secured Leverage Ratio of 1.4 to 1.0 (well below the maximum of 4.5 to 1.0)[237] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from commodity prices, foreign currency, and interest rates, which are partially mitigated by fixed-rate agreements and interest rate swaps - The company faces commodity price risk from electricity costs for its digital and static displays, which it partially mitigates with fixed-rate purchase agreements[262][263] - Interest rate risk exists due to the $600.0 million variable-rate Term Loan. A 0.25% change in the interest rate would alter annualized interest expense by approximately $1.0 million[268] - To hedge interest rate risk, the company uses interest rate swaps. As of September 30, 2021, these agreements covered an aggregate notional amount of $200.0 million at a weighted-average fixed pay rate of 2.7%[270][271] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (September 30, 2021)[273] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[274] PART II - OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, none of which are expected to have a material adverse effect on its financial condition or operations - The company states that while it is involved in ongoing litigation, none of it is expected to have a material adverse effect on its financial condition or results[278] Risk Factors No material changes to previously disclosed risk factors, though the COVID-19 pandemic has heightened certain existing risks - No material changes have been made to the risk factors previously disclosed in the 2020 Annual Report and prior quarterly reports[279] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales or repurchases of its equity securities during the third quarter of 2021 - There were no unregistered sales of equity securities during the period[280] - The company did not repurchase any of its equity securities during the third quarter of 2021[281] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[282] Mine Safety Disclosures The company has no mine safety disclosures, therefore this section is not applicable - None[283] Other Information The company reported no other information for the period - None[284] Exhibits This section lists exhibits filed with the Form 10-Q, including MTA agreement amendments and CEO/CFO certifications - The exhibits include certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002[287] - An amendment to the Advertising License Agreement with the Metropolitan Transportation Authority (MTA), dated July 29, 2021, was filed as an exhibit[287]