Management's discussion and analysis of our financial condition and results of
operations (the "MD&A") should be read in conjunction with the condensed
consolidated financial statements and related notes contained in Item 1 of
Part I of this Quarterly Report on Form 10-Q and the Company's 2021 Annual
Report on Form 10-
The MD&A is organized as follows:
• Overview - Discussion of the nature, key developments and trends of our business in order to provide context for the remainder of this MD&A.
• Results of Operations - Analysis of our financial results of operations at the consolidated and segment levels.
• Liquidity and Capital Resources - Analysis of our short- and long-term liquidity and discussion of our material cash requirements and the anticipated sources of funds needed to satisfy such requirements.
• Critical Accounting Estimates - Discussion of our material accounting estimates that involve a significant level of estimation uncertainty, which we believe are most important to understanding the assumptions and judgments incorporated in our consolidated financial statements.
This discussion contains forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially from those contained in any forward-looking statements. See " Cautionary Statement Concerning Forward-Looking Statements " contained at the end of this MD&A.
OVERVIEW
Description of Our Business and Segments
Our revenue is derived from selling advertising space on the displays we own or
operate in key markets worldwide. We have two reportable business segments,
which we believe reflect how the Company is currently managed:
In
Macroeconomic Indicators, Seasonality and Recent Developments
Advertising for our business is highly correlated to changes in gross domestic
product ("GDP") as advertising spending has historically trended in line with
GDP, both domestically and internationally. Additionally, our international
results are impacted by the economic conditions in the foreign markets in which
we operate and by fluctuations in foreign currency exchange rates. In early
2022, worldwide inflation began to increase. In response to heightened levels of
inflation, central banks, including the
19
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Table of Contents Due to seasonality, the results for the interim period are not indicative of expected results for the full year. We typically experience our weakest financial performance in the first quarter of the calendar year, which is generally offset during the remainder of the year as our business typically experiences its strongest performance in the second and fourth quarters of the calendar year.
As described in our 2021 Annual Report on Form 10-K, COVID-19 had a significant adverse impact on our results of operations during the first quarter of 2021, and we did not experience a return to our pre-COVID-19 historical seasonal levels of revenue until the fourth quarter of 2021. To a large extent, we have experienced similar, or have exceeded, pre-COVID-19 levels of activity during the first nine months of 2022. As our operating performance has improved, we have ceased certain of the temporary operating cost savings initiatives we implemented in response to COVID-19 and have increased our investment in our business through additional capital expenditures.
RESULTS OF OPERATIONS
The discussion of our results of operations is presented on both a consolidated and segment basis.
•Our operating segment profit measure is Segment Adjusted EBITDA, which is calculated as revenue less direct operating expenses and selling, general and administrative expenses, excluding restructuring and other costs, which are defined as costs associated with cost-saving initiatives such as severance, consulting and termination costs and other special costs. The material components of Segment Adjusted EBITDA are discussed below on both a consolidated and segment basis.
•Corporate expenses, depreciation and amortization, impairment charges, other operating income and expense, all non-operating income and expenses, and income taxes are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.
Revenue and expenses "excluding the impact of movements in foreign exchange
rates" in this MD&A are presented because management believes that viewing
certain financial results without the impact of fluctuations in foreign currency
rates facilitates period-to-period comparisons of business performance and
provides useful information to investors. Revenue and expenses "excluding the
impact of movements in foreign exchange rates" are calculated by converting the
current period's revenue and expenses in local currency to
20
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