Issue # 585/ March 30, 2020
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Here are SignValue’s Top Ten Things for the OOH Industry to be optimistic about:
10. OOH is still primarily a local medium.
9. Warmer weather is coming soon, viruses don’t like hot stuff.
8. Long term advertising contracts help to stabilize revenues.
7. Directional advertising will always be important.
6. Traffic volumes are down, but not out!
5. China had a five month run-in with this virus and no new cases.
4. Government stimulus package will help to keep wallets full.
3. People are out spending less, so they’ll have more to spend later.
2. Digital display contracts light up quickly.
and the number one most important thing for the OOH Industry to be optimistic about is...
1. People are resilient, smart and very social beings!
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By Staff Writer
March 26, 2020
What’s the outlook for US out of home revenue in 2020? Billboard Insider and
Signvalue
have prepared projections showing that US out of home revenues could drop 9-14% for the full year 2020.
Clear Media China’s experience
China experienced peak disruption from the Coronavirus in January and February and now the country is returning to work. Clear Media, Clear Channel Outdoor’s 51% owned subsidiary had a 30% decline in year to date sales through February. See this slide from
Clear Media’s 2019 earnings release
.
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Nothing but Questions
March 25, 2020
The Coronavirus or Covid-19 sucks! I go to bed at night with questions. I wake up every morning with questions. During the day all I do is answer, wait for it, more questions. Some are easy but some keep me up. Some I ask myself and some are asked of me. Am I going insane or just a normal business owner dealing with an abnormal chain of events?
The first question is always my employees. If I close, where does that leave my employees? What will they do? Do they have enough money in the bank to survive weeks and maybe months with no income? Will they find another employer who is not closed just to make ends meet? Will they come back? Will the government’s plan take care of them? If they don’t have this job to come to everyday, will they treat it like a vacation and get infected while partying with spring breakers in Florida? If I stay open, where does that leave my employees? Do they have someone to watch their kids because of no school? Do they need to be home teaching their kids instead of working? Are they still socializing or are they practicing social distancing? Are they washing their hands? Will they report their symptoms or not in fear of shame or losing their job? Are they scared to call out?
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Troubling Signs for Out-of-Home amid COVID-19
March 25, 2020
All signs point to a struggling out-of-home industry as consumers stay indoors amid the novel coronavirus outbreak.
Outfront Media's stock, for instance, has fallen 64 percent to about $11 a share since late February; Lamar Advertising is down 52 percent to $41 a share during the same time period. Clear Channel, meanwhile, is coming in under a dollar ($.45) for the first time in its history.
Lamar declined to comment; Clear Channel and Outfront did not comment at deadline.
“There is no way to sugarcoat that demand is incredibly soft right now,” says Matthew O'Connor, co-founder and CEO of AdQuick, a tech company that’s applied programmatic to buying out-of-home media. “Nobody wants to do a huge product push right now, so business is down and will continue to go down until things go back to normal.”
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New York State Says Out of Home Media is Essential
March 25, 2020
New York State, which has issued a strict stay-at-home order, says a major out of home company operating in the state is considered as an “essential business.”
A growing number of states and localities have issued orders for workers to stay at home, to reduce the risk of spreading the coronavirus.
Responding to a request from Lamar Advertising Company, New York State (via Empire State Development), provided a written response:
– The business function of the company is an essential business
– Therefore, the company is not subject to the required 100 percent workforce reduction of the governor’s order
– The exemption applies only to “those employees that must be present at the business location in support of essential business activities.
To be clear, the written response from New York State applied to Lamar, based on information provided.
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OUTFRONT Media Announces Liquidity Measures and Updated Outlook in Response to Coronavirus
March 25, 2020
NEW YORK, March 25, 2020 /PRNewswire/ -- OUTFRONT Media Inc. (NYSE: OUT) today announced business and financial updates in response to the novel coronavirus (COVID-19) pandemic.
To protect our business, clients, and stakeholders in these extraordinary and unprecedented times, we are undertaking many financial and operational actions.
- As of today, we have drawn the balance of our $500 million revolving credit facility. In addition to cash on hand of $59.1 million as of December 31, 2019, this drawdown provides immediate liquidity and financial flexibility.
- Only the revolving credit portion of our senior credit facilities is subject to a maintenance covenant, which is a consolidated net secured leverage ratio of no greater than 4.5x. At December 31, 2019, before the drawdown, this ratio was 1.2x and, adjusted for the drawdown, would have been approximately 2.0x. The ratio calculation uses the trailing four consecutive quarters of operating financials.
- Our senior credit facilities have various baskets for additional debt incurrence, including a consolidated total leverage ratio basket of no greater than 6.0x. At December 31, 2019, before the drawdown, this ratio was 4.4x and, adjusted for the drawdown, would have been approximately 5.4x. The ratio calculation uses the trailing four consecutive quarters of operating financials.
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Look Up
By Ken Klein
March 25, 2020
At the FDR Memorial — which features Roosevelt’s hydropower innovation, the Tennessee Valley Authority — the underground water pumps are broken.
If you look down, a sorry sign says FDR Memorial pumps and electrical systems were burned out by flooding.
America can plan/tame a riven basin spanning seven states but can’t pump water at the FDR Memorial? A metaphor for the economic woe and paralysis wrought by coronavirus?
The headlines are sobering:
“Health systems are strained”
“Jobless claims are up”
“Limits on mobility flatten the (coronavirus) curve… and the economy”
But step back, for the broader view of the memorial… and of history.
Eleanor Roosevelt said FDR’s illness “gave him strength and courage he had not had before.”
Roosevelt and the country overcame the Great Depression and global tyranny.
Near the FDR Memorial in Washington, DC, is the more recent memorial for Martin Luther King, Jr.
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By Staff Writer
March 26, 2020
There’s some breathless sputtering that out of home’s ROI is ruined because no one is driving. Look at this data from
Inrix’s National Traffic Volume Synopsis for March 14-20, 2020
. Traffic is down due not as much as you think. You might want to keep track of the Inrix numbers in case advertisers ask. US traffic volumes are off 30%. Traffic volume is down more than that in big cities like San Francisco and New York and less than that in rural areas.
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Outfront Draws Down Rest of Revolver, Updates Guidance
By Jason Aycock
March 25, 2020
- The company has drawn the balance of a $500M revolving credit facility, and added it to cash on hand of about $59.1M (as of Dec. 31). It notes only the revolving portion of its senior facilities is subject to a maintenance covenant (of net secured leverage ratio no greater than 4.5x; it was 1.2x on Dec. 31, before the drawdown).
- Senior credit facilities have various baskets for taking on more debt, including a total leverage ratio basket of no greater than 6.0x. Adjusting for the drawdown, it would be 5.4x.
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March 24, 2020
What does the Coronavirus mean for the OOH Industry?
Having been in the OOH industry long enough to see many highs and lows, it is my opinion that we can predict the impact of the coronavirus on our industry by looking at what happened after 9/11.
I recall the morning of 9/11, boarding an airplane to fly to New York for the OAAA annual conference, only to be grounded as the events unwound over the next few hours. Going back to the office, no one ever could have imagined what would happen next. In the coming weeks, people were scared to go out. Small mom and pop businesses had no income and couldn’t pay their rent, let alone their outdoor advertising invoice. The snowball effect left many small independent operators struggling themselves since most of their advertisers were local businesses as opposed to large national advertisers. Yes, the big players experienced a financial hit as well, but not to the extent of the smaller operators. This resulted in many small operators having to sell their assets at low multiples to pay off their debt. In the end, the large operators got some good deals on decent inventory.
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March 25, 2020
Some thoughts and observations from Insider’s 23 years of lending and investing in out of home.
The larger companies in OOH should be safe. That doesn’t mean that the perceived value of their business, publicly traded or not, won’t take a hit (we’ll discuss stock values later this week), but their lending relationships are solid and in place. Only exception we see is potentially CCO, but remember they are primarily owned by lending groups coming out of the iHeart bankruptcy.
Lamar gets our perfect timing award. They timed the debt market perfectly, using their solid operating results and strong REIT market values to
refinance in February
just before the downturn in the market. Kudos to Lamar CFO Jay Johnson and his treasury staff.
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2152 S. Vineyard Street, Suite 106
Mesa, Arizona 85210
(480) 657-8400
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