OUTFRONT Media Reports Third Quarter 2018 Results

NEW YORK, Nov. 5, 2018 /PRNewswire/ -- OUTFRONT Media Inc. (NYSE: OUT) today reported results for the quarter ended September 30, 2018.

"Financial performance was strong during the third quarter, with total revenues up 5.6%, Adjusted OIBDA up 7.0%, and AFFO up 10.5%," said Jeremy Male, Chairman and Chief Executive Officer of OUTFRONT Media. "We again saw an impressive increase in local advertising revenues and a return to growth in national, while our digital transformation continues with revenues up double-digits. We feel increasingly positive about our strategic position and we are looking forward to a robust fourth quarter."

Third Quarter 2018 Results

Consolidated
Reported revenues of $414.2 million increased $21.8 million, or 5.6%, for the third quarter of 2018 as compared to the same prior-year period.  On an organic basis, revenues of $412.4 million for the third quarter of 2018 increased 5.3%.

Reported billboard revenues of $290.6 million increased $18.2 million, or 6.7%, due to digital billboard conversions and higher average revenue per display (yield) in U.S. Media, partially offset by lower proceeds from condemnations. On an organic basis, billboard revenues increased 7.0% due to higher average revenue per display (yield) in U.S. Media and digital billboard conversions, partially offset by lower proceeds from condemnations.

Reported transit and other revenues of $123.6 million increased $3.6 million, or 3.0%, due primarily to growth in digital transit displays and the impact of a new accounting standard in the Sports Marketing operating segment. On an organic basis, transit and other revenues increased 1.6% due primarily to growth in digital transit displays.

Total Operating expenses of $215.3 million increased $2.7 million, or 1.3%, due primarily to higher posting, maintenance and other expenses related to the impact of a new accounting standard in our Sports Marketing operating segment and higher billboard lease expense, partially offset by lower transit franchise expenses under the terms of our New York Metropolitan Transportation Authority ("MTA") transit agreement.  Selling, General and Administrative expenses ("SG&A") of $74.4 million increased $10.2 million, or 15.9%, due primarily to higher compensation and other employee-related costs, higher professional fees, and higher strategic business development costs.

Adjusted OIBDA of $129.3 million increased $8.5 million, or 7.0%.

Segment Results

U.S. Media
Reported and organic revenues of $379.7 million increased $16.7 million, or 4.6%, due primarily to an increase in average revenue per display (yield) and digital billboard conversions, partially offset by lower proceeds from condemnations. On an organic basis, billboard revenues increased 6.4% due to higher average revenue per display (yield) and digital billboard conversions, partially offset by lower proceeds from condemnations.  On an organic basis, transit and other revenues increased 0.3% due primarily to growth in revenues from digital displays.

Operating expenses increased $0.8 million, or 0.4%, due to higher billboard property lease costs related to the new MTA billboard agreement, partially offset by lower transit franchise expenses under the terms of our MTA transit agreement. SG&A expenses increased $8.9 million, or 21.0%, primarily due to higher compensation and other employee-related costs, higher strategic business development costs and higher professional fees.

Adjusted OIBDA of $136.2 million increased $7.0 million, or 5.4%.

Other
Reported revenues of $34.5 million increased $5.1 million, or 17.3%, due primarily to improved performance in Canada and the impact of a new accounting standard in our Sports Marketing operating segment ($1.8 million). On an organic basis, revenues increased $4.1 million, or 14.3%.

Operating expenses increased $1.9 million, or 9.0%, driven by the impact of a new accounting standard in our Sports Marketing operating segment ($1.3 million) and higher billboard lease costs in Canada. SG&A expenses increased $0.9 million, or 14.3%, driven primarily by the impact of a new accounting standard in our Sports Marketing operating segment ($0.5 million).

Adjusted OIBDA of $4.2 million increased $2.3 million, or 121.1%.

Corporate
Corporate costs, excluding stock-based compensation, increased $0.8 million, or 7.8%, to $11.1 million due primarily to higher professional fees.

Goodwill Impairment Charge
In the second quarter of 2018, the Canadian reporting unit did not meet revenue expectations, and pacing reflected a decline as compared to the 2018 forecast due to the under performance of our static poster assets and digital displays.  As a result, we determined that there was a decline in the outlook for our Canadian reporting unit which required an interim goodwill impairment analysis.  We determined that the carrying value of our Canadian reporting unit exceeded its fair value, and we recorded an impairment charge of $42.9 million in the Consolidated Statements of Operations for the nine months ended September 30, 2018.

Interest Expense
Net Interest expense in the third quarter of 2018 was $32.0 million, including amortization of deferred financing costs of $1.4 million, as compared to $29.2 million in the same prior-year period, including amortization of deferred financing costs of $1.4 million.  The increase was due primarily to a higher weighted average cost of debt at September 30, 2018 of 5.0% compared to 4.8% in the prior period, a higher outstanding debt balance and from letter of credit facility fees associated with our new MTA transit agreement in 2018.

Income Taxes
The provision for income taxes was $1.0 million in the third quarter of 2018 compared to $2.0 million in the third quarter of 2017.  Cash paid for income taxes in the nine months ended September 30, 2018 was $7.2 million, including payments made during the second quarter of 2018 related to 2017 income taxes and the payment of taxes on built-in gains on properties sold.

Net Income
Net income was $46.8 million in the third quarter of 2018 as compared to net income of $50.7 million in the same prior-year period. Diluted weighted average shares outstanding were 141.5 million for the third quarter of 2018 and 140.9 million for the same prior-year period. Net income per common share for diluted earnings per weighted average share was $0.33 for the third quarter of 2018 as compared to $0.36 in the same prior-year period.

FFO & AFFO
FFO was $85.2 million in the third quarter of 2018, an increase of $7.0 million, or 9.0%, from the same prior-year period, driven primarily by a lower impact of net gains on the disposition of real estate assets, partially offset by lower net income and by lower depreciation and amortization.  AFFO was $86.4 million in the third quarter of 2018, an increase of $8.2 million, or 10.5%, compared to the same prior-year period, due primarily to higher FFO and lower maintenance capital expenditures and lower non-cash portion of income taxes.  AFFO per diluted weighted average share was $0.61 in the third quarter of 2018 and $0.56 in the same prior-year period.

Cash Flow & Capital Expenditures
Net cash flow provided by operating activities of $137.4 million for the nine months ended September 30, 2018 decreased $45.2 million compared to $182.6 million during the same prior-year period, due primarily to prepaid MTA equipment deployment costs.  Total capital expenditures increased $3.5 million to $62.1 million for the nine months ended September 30, 2018, compared to the same prior year period.

Dividends
In the nine months ended September 30, 2018, we paid cash dividends of $152.9 million.  We announced on October 23, 2018 that our board of directors has approved a quarterly cash dividend on our common stock of $0.36 per share payable on December 31, 2018, to shareholders of record at the close of business on December 7, 2018.

Balance Sheet and Liquidity
As of September 30, 2018, our liquidity position included unrestricted cash of $56.7 million, $353.9 million of availability under our $430.0 million revolving credit facility, net of $66.1 million of issued letters of credit against the letter of credit facility sublimit under the revolving credit facility and $10.0 million of outstanding borrowings.  We also have an unused $300.0 million at-the-market equity offering program.  Total debt outstanding as of September 30, 2018 was $2.4 billion, excluding $21.5 million of debt issuance costs.  Total debt outstanding includes a $670.0 million term loan and $1.5 billion of senior unsecured notes, $175.0 million under our accounts receivable securitization facilities, which includes $75.0 million under our new structured repurchase facility entered into on September 6, 2018.

Conference Call 
We will host a conference call to discuss the results on November 5, 2018 at 4:30 p.m. Eastern Time. The conference call numbers are 866-575-6539 (U.S. callers) and 323-994-2082 (International callers) and the passcode for both is 7920629.  Live and replay versions of the conference call will be webcast in the Investor Relations section of our website, www.OUTFRONTmedia.com.

Supplemental Materials
In addition to this press release, we have provided a supplemental investor presentation which can be viewed on our website, www.OUTFRONTmedia.com.

About OUTFRONT Media Inc. 
OUTFRONT leverages the power of technology, location and creativity to connect brands with consumers outside of their homes through one of the largest and most diverse sets of billboard, transit, and mobile assets in North America. Through its ON Smart Media platform, OUTFRONT is implementing digital technology that will fundamentally change the ways advertisers engage audiences on-the-go.

Non-GAAP Financial Measures
In addition to the results prepared in accordance with generally accepted accounting principles in the United States ("GAAP") provided throughout this document, this document and the accompanying tables include non-GAAP financial measures as described below. We calculate organic revenues as reported revenues excluding revenues associated with a significant acquisition, the impact of a new accounting standard, and the impact of foreign currency exchange rates ("non-organic revenues"). We provide organic revenues to understand the underlying growth rate of revenue excluding the impact of non-organic revenue items. Our management believes organic revenues are useful to users of our financial data because it enables them to better understand the level of growth of our business period to period. We calculate and define "Adjusted OIBDA" as operating income (loss) before depreciation, amortization, net (gain) loss on dispositions, stock-based compensation, restructuring charges and impairment charges. We calculate Adjusted OIBDA margin by dividing Adjusted OIBDA by total revenues. Adjusted OIBDA and Adjusted OIBDA margin are among the primary measures we use for managing our business, evaluating our operating performance and planning and forecasting future periods, as each is an important indicator of our operational strength and business performance. Our management believes users of our financial data are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in managing, planning and executing our business strategy. Our management also believes that the presentations of Adjusted OIBDA and Adjusted OIBDA margin, as supplemental measures, are useful in evaluating our business because eliminating certain non-comparable items highlight operational trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. It is management's opinion that these supplemental measures provide users of our financial data with an important perspective on our operating performance and also make it easier for users of our financial data to compare our results with other companies that have different financing and capital structures or tax rates. We calculate Funds From Operations ("FFO") in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO reflects net income (loss) adjusted to exclude gains and losses from the sale of real estate assets, impairment charges, depreciation and amortization of real estate assets, amortization of direct lease acquisition costs and the same adjustments for our equity-based investments, as well as the related income tax effect of adjustments, as applicable. We calculate Adjusted FFO ("AFFO") as FFO adjusted to include cash paid for direct lease acquisition costs as such costs are generally amortized over a period ranging from four weeks to one year and therefore are incurred on a regular basis. AFFO also includes cash paid for maintenance capital expenditures since these are routine uses of cash that are necessary for our operations. In addition, AFFO excludes costs related to restructuring charges, as well as certain non-cash items, including non-real estate depreciation and amortization, stock-based compensation expense, accretion expense, the non-cash effect of straight-line rent and amortization of deferred financing costs, and the non-cash portion of income taxes, as well as the related income tax effect of adjustments, as applicable. We use FFO and AFFO measures for managing our business and for planning and forecasting future periods, and each is an important indicator of our operational strength and business performance, especially compared to other real estate investment trusts ("REITs"). Our management believes users of our financial data are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in managing, planning and executing our business strategy. Our management also believes that the presentations of FFO, AFFO, and related per weighted average share amounts, as supplemental measures, are useful in evaluating our business because adjusting results to reflect items that have more bearing on the operating performance of REITs highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. It is management's opinion that these supplemental measures provide users of our financial data with an important perspective on our operating performance and also make it easier to compare our results to other companies in our industry, as well as to REITs. Since organic revenues, Adjusted OIBDA, Adjusted OIBDA margin, FFO and AFFO and, as applicable, related per weighted average share amounts, are not measures calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, revenues, operating income (loss), net income (loss) and net income (loss) per common share for diluted earnings per share ("EPS"), the most directly comparable GAAP financial measures, as indicators of operating performance. These measures, as we calculate them, may not be comparable to similarly titled measures employed by other companies. In addition, these measures do not necessarily represent funds available for discretionary use and are not necessarily a measure of our ability to fund our cash needs.

Please see Exhibits 4-6 of this release for a reconciliation of the above non-GAAP financial measures to the most directly comparable GAAP financial measures.

Cautionary Statement Regarding Forward-Looking Statements
We have made statements in this document that are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "could," "would," "may," "might," "will," "should," "seeks," "likely," "intends," "plans," "projects," "predicts," "estimates," "forecast" or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions related to our capital resources, portfolio performance and results of operations. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and may not be able to be realized. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: declines in advertising and general economic conditions; competition; government regulation; our inability to increase the number of digital advertising displays in our portfolio; our ability to implement our digital display platform and deploy digital advertising displays to our transit franchise partners; taxes, fees and registration requirements; our ability to obtain and renew key municipal contracts on favorable terms; decreased government compensation for the removal of lawful billboards; content-based restrictions on outdoor advertising; environmental, health and safety laws and regulations; seasonal variations; acquisitions and other strategic transactions that we may pursue could have a negative effect on our results of operations; dependence on our management team and other key employees; the ability of our board of directors to cause us to issue additional shares of stock without stockholder approval; certain provisions of Maryland law may limit the ability of a third party to acquire control of us; our rights and the rights of our stockholders to take action against our directors and officers are limited; our substantial indebtedness; restrictions in the agreements governing our indebtedness; incurrence of additional debt; interest rate risk exposure from our variable-rate indebtedness; our ability to generate cash to service our indebtedness; cash available for distributions; hedging transactions; diverse risks in our Canadian business; a breach of our security measures; changes in regulations and consumer concerns regarding privacy, information security and data, or any failure or perceived failure to comply with these regulations or our internal policies; asset impairment charges for goodwill; our failure to remain qualified to be taxed as a REIT; REIT distribution requirements; availability of external sources of capital; we may face other tax liabilities even if we remain qualified to be taxed as a REIT; complying with REIT requirements may cause us to liquidate investments or forgo otherwise attractive opportunities; our ability to contribute certain contracts to a taxable REIT subsidiary ("TRS"); our planned use of TRSs may cause us to fail to remain qualified to be taxed as a REIT; REIT ownership limits; complying with REIT requirements may limit our ability to hedge effectively; failure to meet the REIT income tests as a result of receiving non-qualifying income; even if we remain qualified to be taxed as a REIT, and we sell assets, we could be subject to tax on any unrealized net built-in gains in the assets held before electing to be treated as a REIT; the Internal Revenue Service (the "IRS") may deem the gains from sales of our outdoor advertising assets to be subject to a 100% prohibited transaction tax; establishing operating partnerships as part of our REIT structure; U.S. federal tax reform legislation could affect us in ways that are difficult to anticipate; and other factors described in our filings with the Securities and Exchange Commission (the "SEC"), including but not limited to the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 28, 2018. All forward-looking statements in this document apply as of the date of this document or as of the date they were made and, except as required by applicable law, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors of new information, data or methods, future events or other changes.

EXHIBITS