The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our historical consolidated financial statements and the notes thereto appearing in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSecurities and Exchange Commission (the "SEC") onFebruary 24, 2022 , and the unaudited consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q. This MD&A contains forward-looking statements that involve numerous risks and uncertainties. The forward-looking statements are subject to a number of important factors, including, but not limited to, those factors discussed in the sections entitled "Risk Factors" in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC onFebruary 24, 2022 , and the section entitled "Cautionary Statement Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q, that could cause our actual results to differ materially from the results described herein or implied by such forward-looking statements. Except as otherwise indicated or unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to (i) "OUTFRONT Media ," "the Company," "we," "our," "us" and "our company" meanOUTFRONT Media Inc. , aMaryland corporation, and unless the context requires otherwise, its consolidated subsidiaries, and (ii) the "25 largest markets in theU.S. ," "approximately 150 markets in theU.S. andCanada " and "Nielsen Designated Market Areas" are based, in whole or in part, onNielsen Media Research's 2022 Designated Market Area rankings.
Overview
OUTFRONT Media is a real estate investment trust ("REIT"), which provides advertising space ("displays") on out-of-home advertising structures and sites inthe United States (the "U.S.") andCanada . We currently manage our operations through two operating segments-U.S. Billboard and Transit, which is included in ourU.S. Media reportable segment, and International. International does not meet the criteria to be a reportable segment and accordingly, is included in Other (see Note 18. Segment Information to the Consolidated Financial Statements).
Business
We are one of the largest providers of advertising space on out-of-home advertising structures and sites across theU.S. andCanada . Our inventory consists of billboard displays, which are primarily located on the most heavily traveled highways and roadways in top Nielsen Designated Market Areas ("DMAs"), and transit advertising displays operated under exclusive multi-year contracts with municipalities in large cities across theU.S. andCanada . In total, we have displays in all of the 25 largest markets in theU.S. and approximately 150 markets in theU.S. andCanada . Our top market, high profile location focused portfolio includes sites in and around bothGrand Central Station andTimes Square inNew York , various locations alongSunset Boulevard inLos Angeles , and theBay Bridge inSan Francisco . The breadth and depth of our portfolio provides our customers with a range of options to address their marketing objectives, from national, brand-building campaigns to hyper-local campaigns that drive customers to the advertiser's website or retail location "one mile down the road." In addition to providing location-based displays, we also focus on delivering mass and targeted audiences to our customers. Geopath, the out-of-home advertising industry's audience measurement system, enables us to build campaigns based on the size and demographic composition of audiences. As part of our technology platform, we are developing solutions for enhanced demographic and location targeting, and engaging ways to connect with consumers on-the-go. Additionally, our OUTFRONT Mobile Network products allow our customers to further leverage location targeting with interactive mobile advertising. We believe out-of-home continues to be an attractive form of advertising, as our displays are always viewable and cannot be turned off, skipped, blocked or fast-forwarded. Further, out-of-home advertising can be an effective "stand-alone" medium, as well as an integral part of a campaign to reach audiences using multiple forms of media, including television, radio, print, online, mobile and social media advertising platforms. We provide our customers with a differentiated advertising solution at an attractive price point relative to other forms of advertising. In addition to leasing displays, we provide other value-added services to our customers, such as pre-campaign category research, consumer insights, print production and post-campaign tracking and analytics. 24
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U.S. Media. OurU.S. Media segment generated 19% of its revenues in theNew York City metropolitan area in the three months endedJune 30, 2022 , 14% in the three months endedJune 30, 2021 , 19% in the six months endedJune 30, 2022 , and 13% in the six months endedJune 30, 2021 , and generated 16% in theLos Angeles metropolitan area in each of the three and six months endedJune 30, 2022 and 2021. In the three months endedJune 30, 2022 , ourU.S. Media segment generated$422.5 million of Revenues and$129.2 million of Operating income before Depreciation, Amortization, Net (gain) loss on dispositions and Stock-based compensation ("Adjusted OIBDA"). In the three months endedJune 30, 2021 , ourU.S. Media segment generated$321.8 million of Revenues and$80.6 million of Adjusted OIBDA. In the six months endedJune 30, 2022 , ourU.S. Media segment generated$776.7 million of Revenues and$209.3 million of Adjusted OIBDA. In the six months endedJune 30, 2021 , ourU.S. Media segment generated$567.2 million of Revenues and$105.2 million of Adjusted OIBDA. (See the "Segment Results of Operations" section of this MD&A.) Other (includes International). In the three months endedJune 30, 2022 , Other generated$27.7 million of Revenues and$7.8 million of Adjusted OIBDA. In the three months endedJune 30, 2021 , Other generated$19.2 million of Revenues and$1.6 million of Adjusted OIBDA. In the six months endedJune 30, 2022 , Other generated$47.0 million of Revenues and$8.4 million of Adjusted OIBDA. In the six months endedJune 30, 2021 , Other generated$33.0 million of Revenues and an Adjusted OIBDA loss of$0.4 million .
COVID-19 Impact
Though we remain able to continue to sell and service our displays with no significant disruption, governmental restrictions have eased in most of our markets and most of our markets have commenced their economic recoveries, our transit businesses are still experiencing the significant impact of the ongoing novel coronavirus ("COVID-19") pandemic. There still remains uncertainty around the severity and duration of the COVID-19 pandemic and the measures that may be taken in response to the COVID-19 pandemic. If the measures that were taken in response to the COVID-19 pandemic in 2020 and 2021 are reimplemented in a manner that reduces foot traffic, roadway traffic, commuting, transit ridership and overall target advertising audiences in the markets in which we do business, there could be a significant impact on our business. We continue to monitor the evolving situation and guidance from federal, state and local public health authorities and may take actions based on their recommendations. When the COVID-19 pandemic subsides, there can be no assurances as to the time it may take to generate total revenues, particularly in ourU.S. Media segment and with respect to our transit and other business, at pre-COVID-19 pandemic levels. Accordingly, the Company cannot reasonably estimate the full impact of the COVID-19 pandemic on our business, financial condition and results of operations at this time, which may be material. As a result of the impact of the COVID-19 pandemic on our business and results of operations, we expect our key performance indicators and total revenues to incrementally improve in 2022 as compared to 2021, but some key performance indicators will continue to be materially lower in 2022 than pre-COVID-19 pandemic levels. We expect total revenues in 2022 to surpass pre-COVID-19 pandemic levels based on our current expectation of strong performance in total billboard revenues in ourU.S. Media segment. We expect total transit and other revenues in ourU.S. Media segment to incrementally improve in 2022, but still remain materially below pre-COVID-19 pandemic levels until 2023. We also expect Adjusted OIBDA to incrementally improve in 2022, driven by improvements in our transit and other business, and be comparable to pre-COVID-19 pandemic levels. We expect total expenses to increase in 2022 as compared to 2021, and exceed pre-COVID-19 pandemic levels. In particular, we expect billboard property lease expenses, such as rental expenses, and posting, maintenance and other expenses, as a percentage of revenues, to be slightly lower than pre-COVID-19 pandemic levels. We expect transit franchise expenses, such as transit franchise payments, as a percentage of revenues, to decrease in 2022 as compared to 2021, but be higher in 2022 than pre-COVID-19 pandemic levels, primarily due to the guaranteed minimum annual payment amounts owed to theNew York Metropolitan Transportation Authority (the "MTA") and other transit franchise partners as total transit and other revenues incrementally improve in the future. Results for the three and six months endedJune 30, 2022 , are not indicative of the results that may be expected for the fiscal year endingDecember 31, 2022 .
Economic Environment
Our revenues and operating results are sensitive to fluctuations in advertising expenditures, general economic conditions and other external events beyond our control, such as the COVID-19 pandemic as described above and supply chain disruptions and heightened levels of inflation as described below. We rely on third parties to manufacture and transport our digital displays. As a result of the current market-wide supply shortages and logistics disruptions as the economy recovers from the COVID-19 pandemic, we have experienced delays and price increases with respect to certain of our digital displays, which will continue in 2022, and could have an adverse effect on our business, financial condition and results of operations. 25
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Due to the current heightened levels of inflation and commodity prices in theU.S. and abroad, we have also experienced increases with respect to our posting, maintenance and other expenses and our corporate expenses, which will continue in 2022, and could have an adverse effect on our business, financial condition and results of operations. Our billboard property lease expenses and transit franchise expenses have been less impacted by the current heightened levels of inflation due to the long-term nature of most of our operating leases and transit franchise agreements. However, our transit franchise agreements that contain inflationary price adjustments may cause increases in our transit franchise expenses in the near-term if the current heightened levels of inflation continue. Though the Company cannot reasonably estimate the full impact of the current heightened levels of inflation on our business, financial condition and results of operations at this time, a portion of these increases may be partially offset by increases in advertising rates on our displays and cost efficiencies. Business Environment The outdoor advertising industry is fragmented, consisting of several companies operating on a national basis, as well as hundreds of smaller regional and local companies operating a limited number of displays in a single or a few local geographic markets. We compete with these companies for both customers and structure and display locations. We also compete with other media, including online, mobile and social media advertising platforms and traditional advertising platforms (such as television, radio, print and direct mail marketers). In addition, we compete with a wide variety of out-of-home media, including advertising in shopping centers, airports, movie theaters, supermarkets and taxis. Increasing the number of digital displays in our prime audience locations is an important element of our organic growth strategy, as digital displays have the potential to attract additional business from both new and existing customers. We believe digital displays are attractive to our customers because they allow for the development of richer and more visually engaging messages, provide our customers with the flexibility both to target audiences by time of day and to quickly launch new advertising campaigns, and eliminate or greatly reduce print production and installation costs. In addition, digital displays enable us to run multiple advertisements on each display. Digital billboard displays generate approximately four times more revenue per display on average than traditional static billboard displays. Digital billboard displays also incur, on average, approximately two to four times more costs, including higher variable costs associated with the increase in revenue than traditional static billboard displays. As a result, digital billboard displays generate higher profits and cash flows than traditional static billboard displays. The majority of our digital billboard displays were converted from traditional static billboard displays. We have commenced deployment of state-of-the-art digital transit displays in connection with several transit franchises and are planning to increase deployments over the coming years. In the future, we expect revenues generated on digital transit displays will be a multiple of the revenues generated on comparable static transit displays. Subject to the impact of the COVID-19 pandemic, we intend to incur significant equipment deployment costs and capital expenditures in the coming years to continue increasing the number of digital displays in our portfolio. We have built or converted 54 new digital billboard displays in theU.S. and 5 new digital billboard displays inCanada during the six months endedJune 30, 2022 . Additionally, in the six months endedJune 30, 2022 , we entered into marketing arrangements to sell advertising on 25 third-party digital billboard displays in theU.S. In the six months endedJune 30, 2022 , we have built, converted or replaced 2,241 digital transit and other displays in theU.S. The following table sets forth information regarding our digital displays. Digital Revenues (in millions) for the Six Months Ended Number of Digital Displays as of June 30, 2022(a) June 30, 2022(a) Digital Digital Transit and Digital Transit and Total Digital Digital Billboard Other Location Billboard Other Revenues Displays Displays Total Digital Displays United States$ 165.7 $ 57.1 $ 222.8 1,519 14,829 16,348 Canada 15.6 1.0 16.6 251 120 371 Total$ 181.3 $ 58.1 $ 239.4 1,770 14,949 16,719 (a)Digital display amounts include 4,187 displays reserved for transit agency use. Our number of digital displays is impacted by acquisitions, dispositions, management agreements, the net effect of new and lost billboards, and the net effect of won and lost franchises in the period. Our revenues and profits may fluctuate due to seasonal advertising patterns and influences on advertising markets. Typically, our revenues and profits are highest in the fourth quarter, during the holiday shopping season, and lowest in the first quarter, as advertisers adjust their spending following the holiday shopping season. As described above, our revenues and profits may also fluctuate due to external events beyond our control, such as the COVID-19 pandemic. 26
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We have a diversified base of customers across various industries. During the three months endedJune 30, 2022 , our largest categories of advertisers were Entertainment, Retail and Health/Medical, each of which represented approximately 20%, 11% and 9% of our totalU.S. Media segment revenues, respectively. During the three months endedJune 30, 2021 , our largest categories of advertisers were Entertainment, Health/Medical and Retail, each of which represented approximately 16%, 9% and 9% of our totalU.S. Media segment revenues, respectively. During the six months endedJune 30, 2022 , our largest categories of advertisers were Entertainment, Retail and Health/Medical, each of which represented approximately 21%, 10% and 10% of our totalU.S. Media segment revenues, respectively. During the six months endedJune 30, 2021 , our largest categories of advertisers were Entertainment, Health/Medical and Retail, each of which represented approximately 16%, 10% and 9% of our totalU.S. Media segment revenues, respectively. Our large-scale portfolio allows our customers to reach a national audience and also provides the flexibility to tailor campaigns to specific regions or markets. In the three months endedJune 30, 2022 , we generated approximately 42% of ourU.S. Media segment revenues from national advertising campaigns compared to approximately 40% in the same prior-year period. In the six months endedJune 30, 2022 , we generated approximately 42% of ourU.S. Media segment revenues from national advertising campaigns compared to approximately 39% in the same prior-year period. Our transit businesses require us to periodically obtain and renew contracts with municipalities and other governmental entities. When these contracts expire, we generally must participate in highly competitive bidding processes in order to obtain or renew contracts.
Key Performance Indicators
Our management reviews our performance by focusing on the indicators described below.
Several of our key performance indicators are not prepared in conformity with Generally Accepted Accounting Principles inthe United States of America ("GAAP"). We believe these non-GAAP performance indicators are meaningful supplemental measures of our operating performance and should not be considered in isolation of, or as a substitute for, their most directly comparable GAAP financial measures. Three Months Ended Six Months Ended June 30, % June 30, % (in millions, except percentages) 2022 2021 Change 2022 2021 Change Revenues$ 450.2 $ 341.0 32 %$ 823.7 $ 600.2 37 % Organic revenues(a)(b) 447.8 340.4 32 821.3 599.6 37 Operating income (loss) 79.9 29.1 175 108.4 (1.9) * Adjusted OIBDA(b) 125.3 70.0 79 195.5 81.1 141 Adjusted OIBDA(b) margin 28 % 21 % 24 % 14 % Funds from operations ("FFO")(b) attributable to OUTFRONT Media Inc. 92.4 39.7 133 134.2 9.3 * Adjusted FFO ("AFFO")(b) attributable to OUTFRONT Media Inc. 93.2 39.6 135 128.7 15.1 * Net income (loss) attributable to OUTFRONT Media Inc. 48.0 (0.9) * 47.9 (68.6) * *Calculation is not meaningful. (a)Organic revenues exclude revenues associated with a significant acquisition 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. Since organic revenues are not calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, revenues as an indicator of operating performance. Organic revenues, as we calculate it, may not be comparable to similarly titled measures employed by other companies. (b)See the "Reconciliation of Non-GAAP Financial Measures" and "Revenues" sections of this MD&A for reconciliations of Operating income (loss) to Adjusted OIBDA, Net income (loss) attributable toOUTFRONT Media Inc. to FFO attributable toOUTFRONT Media Inc. and AFFO attributable toOUTFRONT Media Inc. and Revenues to organic revenues. Adjusted OIBDA
We calculate Adjusted OIBDA as operating income (loss) before depreciation, amortization, net (gain) loss on dispositions, stock-based compensation and restructuring charges. We calculate Adjusted OIBDA margin by dividing Adjusted OIBDA by
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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.
FFO and AFFO
When used herein, references to "FFO" and "AFFO" mean "FFO attributable toOUTFRONT Media Inc. " and "AFFO attributable toOUTFRONT Media Inc. ," respectively. We calculate FFO in accordance with the definition established by theNational Association of Real Estate Investment Trusts ("NAREIT"). FFO reflects net income (loss) attributable toOUTFRONT Media Inc. adjusted to exclude gains and losses from the sale of real estate assets, depreciation and amortization of real estate assets, amortization of direct lease acquisition costs and the same adjustments for our equity-based investments and non-controlling interests, as well as the related income tax effect of adjustments, as applicable. We calculate 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 restructuring charges and losses on extinguishment of debt, as well as certain non-cash items, including non-real estate depreciation and amortization, a gain on disposition of non-real estate assets, stock-based compensation expense, accretion expense, the non-cash effect of straight-line rent, amortization of deferred financing costs and the same adjustments for our non-controlling interests, along with the non-cash portion of income taxes, and 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 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 and AFFO, 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 Adjusted OIBDA, Adjusted OIBDA margin, FFO and AFFO are not measures calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, operating income (loss), net income (loss) attributable toOUTFRONT Media Inc. , and revenues, 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. 28
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Reconciliation of Non-GAAP Financial Measures
The following table reconciles Operating income (loss) to Adjusted OIBDA, and Net income (loss) attributable toOUTFRONT Media Inc. to FFO attributable toOUTFRONT Media Inc. and AFFO attributable toOUTFRONT Media Inc. Three Months Ended Six Months Ended June 30, June 30, (in millions, except per share amounts) 2022 2021 2022 2021 Total revenues$ 450.2 $ 341.0 $ 823.7 $ 600.2 Operating income (loss)$ 79.9 $ 29.1 $ 108.4 $ (1.9) Net (gain) loss on dispositions 0.2 (2.9) (0.1) (3.2) Depreciation 19.4 20.0 38.7 40.0 Amortization 17.3 16.3 32.1 32.7 Stock-based compensation 8.5 7.5 16.4 13.5 Adjusted OIBDA$ 125.3 $ 70.0 $ 195.5 $ 81.1 Adjusted OIBDA margin 28 % 21 % 24 % 14 % Net income (loss) attributable to OUTFRONT Media Inc.$ 48.0 $ (0.9) $ 47.9 $ (68.6) Depreciation of billboard advertising structures 14.0 14.1 27.6 28.2 Amortization of real estate-related intangible assets 14.5 12.6 27.9 25.0 Amortization of direct lease acquisition costs 15.7 13.9 31.0 25.1 Net (gain) loss on disposition of real estate assets 0.2 0.1 (0.1) (0.2) Adjustment related to non-controlling interests - (0.1) (0.1) (0.2) FFO attributable to OUTFRONT Media Inc. 92.4 39.7 134.2 9.3 Non-cash portion of income taxes 0.4 (4.1) (3.8) (9.3) Cash paid for direct lease acquisition costs (13.0) (10.8) (29.0) (22.9) Maintenance capital expenditures (7.0) (4.8) (11.4) (8.4) Other depreciation 5.4 5.9 11.1 11.8 Other amortization 2.8 3.7 4.2 7.7 Gain on disposition of non-real estate assets(a) - (3.0) - (3.0) Stock-based compensation 8.5 7.5 16.4 13.5 Non-cash effect of straight-line rent 1.3 2.2 2.3 4.2 Accretion expense 0.7 0.6 1.4 1.3 Amortization of deferred financing costs 1.7 1.9 3.3 3.8 Loss on extinguishment of debt - - - 6.3 Income tax effect of adjustments(b) - 0.8 - 0.8
AFFO attributable to
(a)Gain related to the sale of all of our equity interests in certain of our subsidiaries, which held all of the assets of our Sports Marketing operating segment. (b)Income tax effect related to a Gain on disposition of non-real estate assets. FFO increased$52.7 million , or 133%, in the three months endedJune 30, 2022 , compared to the same prior-year period, due primarily to higher operating income and higher amortization of both real estate-related intangible assets and direct lease acquisition costs. FFO increased$124.9 million in the six months endedJune 30, 2022 , compared to the same prior-year period, due primarily to higher operating income, a loss on extinguishment of debt in 2021 and higher amortization of both real estate-related intangible assets and direct lease acquisition costs. AFFO increased$53.6 million , or 135%, in the three months endedJune 30, 2022 , and increased$113.6 million in the six months endedJune 30, 2022 , compared to the same prior-year periods. The increases in AFFO were due primarily to higher operating income. 29
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Analysis of Results of Operations
Revenues
We derive Revenues primarily from providing advertising space to customers on our advertising structures and sites. Our contracts with customers generally cover periods ranging from four weeks to one year. Revenues from billboard displays are recognized as rental income on a straight-line basis over the contract term. Transit and other revenues are recognized over the contract period. (See Note 11. Revenues to the Consolidated Financial Statements.) Three Months Ended Six Months Ended June 30, % June 30, % (in millions, except percentages) 2022 2021 Change 2022 2021 Change Revenues: Billboard$ 354.0 $ 287.3 23 %$ 652.2 $ 510.9 28 % Transit and other 96.2 53.7 79 171.5 89.3 92 Total revenues$ 450.2 $ 341.0 32$ 823.7 $ 600.2 37 Organic revenues(a): Billboard$ 351.6 $ 286.8 23$ 649.8 $ 510.4 27 Transit and other 96.2 53.6 79 171.5 89.2 92 Total organic revenues(a) 447.8 340.4 32 821.3 599.6 37 Non-organic revenues: Billboard 2.4 0.5 * 2.4 0.5 * Transit and other - 0.1 * - 0.1 * Total non-organic revenues 2.4 0.6 * 2.4 0.6 * Total revenues$ 450.2 $ 341.0 32$ 823.7 $ 600.2 37 *Calculation is not meaningful. (a)Organic revenues exclude revenues associated with a significant acquisition and the impact of foreign currency exchange rates ("non-organic revenues").
Total revenues increased by
In the three and six months endedJune 30, 2022 , non-organic revenues reflect the impact of a significant acquisition. In the three and six months endedJune 30, 2021 , non-organic revenues reflect the impact of foreign currency exchange rates. Total billboard revenues increased$66.7 million , or 23%, in the three months endedJune 30, 2022 , and increased$141.3 million , or 28%, in the six months endedJune 30, 2022 , compared to the same prior-year periods. The increases were primarily due to an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services, and the impact of acquisitions. Organic billboard revenues increased$64.8 million , or 23%, in the three months endedJune 30, 2022 , and increased$139.4 million , or 27%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily due to an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services. Total transit and other revenues increased$42.5 million , or 79%, in the three months endedJune 30, 2022 , compared to the same prior-year period and increased$82.2 million , or 92%, in the six months endedJune 30, 2022 , compared to the same prior-year period. The increases were primarily driven by an increase in average revenue per display (yield), as we have experienced increases in overall demand for our services due to an increase in transit ridership, partially offset by the loss of a transit franchise contract. Organic transit and other revenues increased$42.6 million , or 79%, in the three months endedJune 30, 2022 , and increased$82.3 million , or 92%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily driven by an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services due to an increase in transit ridership, partially offset by the loss of a transit franchise contract. 30
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Table of Contents Expenses Three Months Ended Six Months Ended June 30, % June 30, % (in millions, except percentages) 2022 2021 Change 2022 2021 Change Expenses: Operating$ 226.5 $ 189.6 19 %$ 439.3 $ 367.2 20 % Selling, general and administrative 106.9 88.9 20 205.3 165.4 24 Net (gain) loss on dispositions 0.2 (2.9) * (0.1) (3.2) (97) Depreciation 19.4 20.0 (3) 38.7 40.0 (3) Amortization 17.3 16.3 6 32.1 32.7 (2) Total expenses$ 370.3 $ 311.9 19$ 715.3 $ 602.1 19
*Calculation is not meaningful.
Operating Expenses Three Months Ended Six Months Ended June 30, % June 30, % (in millions, except percentages) 2022 2021 Change 2022 2021 Change Operating expenses: Billboard property lease$ 112.5 $ 100.7 12 %$ 219.8 $ 194.8 13 % Transit franchise 59.4 42.5 40 113.1 82.1 38 Posting, maintenance and other 54.6 46.4 18 106.4 90.3 18 Total operating expenses$ 226.5 $ 189.6 19$ 439.3 $ 367.2 20 Billboard property lease expenses represented 32% of billboard revenues in the three months endedJune 30, 2022 , 35% in the three months endedJune 30, 2021 , 34% of billboard revenues in the six months endedJune 30, 2022 , and 38% in the six months endedJune 30, 2021 . The decreases in billboard property lease expenses as a percentage of revenues is primarily due to an increase in billboard revenues and the fixed nature of certain billboard property lease expenses (see Note 6. Leases to the Consolidated Financial Statements). Transit franchise expenses represented 68% of transit display revenues in the three months endedJune 30, 2022 , 91% in the three months endedJune 30, 2021 , 73% of transit display revenues in the six months endedJune 30, 2022 , and 107% in the six months endedJune 30, 2021 . The decreases in transit franchise expense as a percentage of revenues are primarily driven by an increase in transit revenue, while the MTA was paid guaranteed minimum annual payments in each of the three and six months endedJune 30, 2022 and 2021. Billboard property lease and transit franchise expenses increased$28.7 million , or 20%, in the three months endedJune 30, 2022 , and increased$56.0 million , or 20%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily due to higher billboard and transit revenues, and higher guaranteed minimum annual payments to the MTA. Posting, maintenance and other expenses as a percentage of Revenues were 12% in the three months endedJune 30, 2022 , 14% in the three months endedJune 30, 2021 , 13% in the six months endedJune 30, 2022 , and 15% in the six months endedJune 30, 2021 . Posting, maintenance and other expenses increased$8.2 million , or 18%, in the three months endedJune 30, 2022 , and increased$16.1 million , or 18%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily due to increased activity resulting in higher production and materials cost, higher compensation-related expenses, higher posting and rotation costs and higher maintenance and utilities cost, driven by economic recovery from the COVID-19 pandemic and inflation-driven utility cost increases in 2022.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses represented 24% of Revenues in the three months endedJune 30, 2022 , 26% of Revenues in the three months endedJune 30, 2021 , 25% of Revenues in the six months endedJune 30, 2022 , and 28% of Revenues in the same prior-year period. SG&A expenses increased$18.0 million , or 20%, in the three months endedJune 30, 2022 , compared to the same prior-year period, primarily due to higher compensation-related expenses, including commissions and salaries, higher professional fees, increased business travel resulting in higher travel and entertainment expenses, and a higher provision for doubtful 31
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accounts, driven by both business performance improvements during the period and the impact of COVID-19 on the second quarter of 2021. The increase in SG&A expenses was partially offset by the impact of market fluctuations on an equity-linked retirement plan offered by the Company to certain employees. SG&A expenses increased$39.9 million , or 24%, in the six months endedJune 30, 2022 , compared to the same prior-year period, primarily due to higher compensation-related expenses, including commissions, salaries and bonuses, and a higher provision for doubtful accounts, driven by both business performance improvements during the period and the impact of COVID-19 on the first half of 2021, increased post-COVID-19 pandemic travel resulting in higher travel and entertainment expenses, and higher professional fees. The increase in SG&A expenses was partially offset by the impact of market fluctuations on an equity-linked retirement plan offered by the Company to certain employees.
Net (Gain) Loss on Dispositions
Net loss on dispositions was$0.2 million in the three months endedJune 30, 2022 , compared to a Net gain on dispositions of$2.9 million in the three months endedJune 30, 2021 . Net gain on dispositions decreased$3.1 million , or 97%, in the six months endedJune 30, 2022 , compared to the same prior-year period.
Depreciation
Depreciation decreased$0.6 million , or 3%, in the three months endedJune 30, 2022 , and decreased$1.3 million , or 3%, in the six months endedJune 30, 2022 , compared to the same prior-year periods.
Amortization
Amortization increased
Interest Expense, Net
Interest expense, net, was$31.6 million (including$1.7 million of deferred financing costs) in the three months endedJune 30, 2022 , compared to$32.1 million (including$1.9 million of deferred financing costs) in the same prior-year period. Interest expense, net, was$62.3 million (including$3.3 million of deferred financing costs) in the six months endedJune 30, 2022 , and$66.7 million (including$3.8 million of deferred financing costs) in the same prior-year period, primarily due to a lower outstanding average debt balance, partially offset by higher interest rates.
Loss on Extinguishment of Debt
In the six months endedJune 30, 2021 , we recorded a loss on extinguishment of debt of$6.3 million relating to the redemption of our 5.625% Senior Unsecured Notes due 2024 in the first quarter of 2021.
Benefit (Provision) for Income Taxes
Provision for income taxes was$1.2 million in the three months endedJune 30, 2022 , compared to a Benefit for income taxes of$2.4 million in the three months endedJune 30, 2021 , due primarily to income inCanada in 2022 compared to losses inCanada in 2021 and lower taxable REIT subsidiary ("TRS") losses in 2022 compared to 2021. Benefit for income taxes decreased$6.2 million , or 87%, in the six months endedJune 30, 2022 , compared to the same prior-year period, due primarily to income inCanada in 2022 compared to losses inCanada in 2021 and lower TRS losses in 2022. Net Income (Loss) Net income before allocation to non-controlling interests was$48.4 million in the three months endedJune 30, 2022 , compared to a Net loss before allocation to non-controlling interests of$0.7 million in the same prior-year period, due primarily to higher operating income, as we have experienced increases in customer advertising expenditures and overall demand for our services, partially offset by a provision for income taxes in 2022 compared to a benefit for income taxes in 2021. Net income before allocation to non-controlling interests was$48.5 million in the six months endedJune 30, 2022 , compared to a Net loss before allocation to non-controlling interests of$68.3 million in the same prior-year period, due primarily to higher operating income, as we have experienced increases in customer advertising expenditures and overall demand for our services, and a loss on extinguishment of debt in 2021, partially offset by a lower benefit for income taxes. 32
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Segment Results of Operations
We present Adjusted OIBDA as the primary measure of profit and loss for our reportable segments. (See the "Key Performance Indicators" section of this MD&A and Note 19. Segment Information to the Consolidated Financial Statements.)
We currently manage our operations through two operating segments-U.S. Billboard and Transit, which is included in ourU.S. Media reportable segment, and International. International does not meet the criteria to be a reportable segment and accordingly, is included in Other. Our segment reporting therefore includesU.S. Media and Other.
The following table presents our Revenues, Adjusted OIBDA and Operating income
(loss) by segment in the three and six months ended
Three Months Ended Six Months Ended June 30, June 30, (in millions) 2022 2021 2022 2021 Revenues: U.S. Media$ 422.5 $ 321.8 $ 776.7 $ 567.2 Other 27.7 19.2 47.0 33.0 Total revenues$ 450.2 $ 341.0 $ 823.7 $ 600.2 Operating income (loss)$ 79.9 $ 29.1 $ 108.4 $ (1.9) Net (gain) loss on dispositions 0.2 (2.9) (0.1) (3.2) Depreciation 19.4 20.0 38.7 40.0 Amortization 17.3 16.3 32.1 32.7 Stock-based compensation(a) 8.5 7.5 16.4 13.5 Total Adjusted OIBDA$ 125.3 $ 70.0 $ 195.5 $ 81.1 Adjusted OIBDA: U.S. Media$ 129.2 $ 80.6 $ 209.3 $ 105.2 Other 7.8 1.6 8.4 (0.4) Corporate (11.7) (12.2) (22.2) (23.7) Total Adjusted OIBDA$ 125.3 $ 70.0 $ 195.5 $ 81.1 Operating income (loss): U.S. Media$ 95.3 $ 47.3 $ 144.6 $ 38.7 Other 4.8 1.5 2.4 (3.4) Corporate (20.2) (19.7)
(38.6) (37.2)
Total operating income (loss)
(a)Stock-based compensation is classified as Corporate expense.
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Table of ContentsU.S. Media Three Months Ended Six Months Ended June 30, % June 30, % (in millions, except percentages) 2022 2021 Change 2022 2021 Change Revenues: Billboard$ 332.1 $ 271.8 22 %$ 615.5 $ 484.3 27 % Transit and other 90.4 50.0 81 161.2 82.9 94 Total revenues$ 422.5 $ 321.8 31$ 776.7 $ 567.2 37 Organic revenues(a): Billboard$ 329.7 $ 271.8 21$ 613.1 $ 484.3 27 Transit and other 90.4 50.0 81 161.2 82.9 94 Total organic revenues(a) 420.1 321.8 31 774.3 567.2 37 Non-organic revenues: Billboard 2.4 - * 2.4 - * Transit and other - - * - - * Total non-organic revenues 2.4 - * 2.4 - * Total revenues 422.5 321.8 31 776.7 567.2 37 Operating expenses (212.2) (176.8) 20 (411.6) (342.9) 20 SG&A expenses (81.1) (64.4) 26 (155.8) (119.1) 31 Adjusted OIBDA$ 129.2 $ 80.6 60$ 209.3 $ 105.2 99 Adjusted OIBDA margin 31 % 25 % 27 % 19 % Operating income$ 95.3 $ 47.3 101$ 144.6 $ 38.7 * Net (gain) loss on dispositions 0.2 0.1 100 (0.1) (0.2) (50) Depreciation and amortization 33.7 33.2 2 64.8 66.7 (3) Adjusted OIBDA$ 129.2 $ 80.6 60$ 209.3 $ 105.2 99 * Calculation is not meaningful. (a)Organic revenues exclude revenues associated with a significant acquisition ("non-organic revenues"). TotalU.S. Media segment revenues increased$100.7 million , or 31%, in the three months endedJune 30, 2022 , and increased$209.5 million , or 37%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, due primarily to stronger transit revenues and higher billboard revenues. While transit revenues have increased, transit revenues remain below pre-COVID-19 pandemic levels, as overall ridership remains materially below pre-COVID-19 pandemic levels. We generated approximately 42% of ourU.S. Media segment revenues from national advertising campaigns in the three months endedJune 30, 2022 , 40% in the three months endedJune 30, 2021 , 42% in the six months endedJune 30, 2022 , and 39% in the six months endedJune 30, 2021 .
In the three and six months ended
Billboard revenues in theU.S. Media segment increased$60.3 million , or 22%, in the three months endedJune 30, 2022 , and increased$131.2 million , or 27%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, reflecting an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services and the impact of acquisitions. Organic billboard revenues in theU.S. Media segment increased$57.9 million , or 21%, in the three months endedJune 30, 2022 , and increased$128.8 million , or 27%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily due to an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services. Transit and other revenues in theU.S. Media segment increased$40.4 million , or 81%, in the three months endedJune 30, 2022 , and increased$78.3 million , or 94%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, 34
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primarily driven by an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services due to an increase in transit ridership, partially offset by the loss of a transit franchise contract. Organic transit and other revenues in theU.S. Media segment increased$40.4 million , or 81%, in the three months endedJune 30, 2022 , and increased$78.3 million , or 94%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily driven by an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services due to an increase in transit ridership, partially offset by the loss of a transit franchise contract. Operating expenses in theU.S. Media segment increased$35.4 million , or 20%, in the three months endedJune 30, 2022 , and increased$68.7 million , or 20%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily driven by higher transit franchise and billboard lease costs associated with the increase in revenue, higher production and materials cost, higher compensation-related expenses, higher posting and rotation costs and higher maintenance and utilities cost, driven by economic recovery from the COVID-19 pandemic and inflation-driven utility cost increases in 2022, as well as higher guaranteed minimum annual payments to the MTA. SG&A expenses in theU.S. Media segment increased$16.7 million , or 26%, in the three months endedJune 30, 2022 , and increased$36.7 million , or 31%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily driven by higher compensation-related expenses, including commissions, salaries and bonuses, increased business travel resulting in higher travel and entertainment expenses, and a higher provision for doubtful accounts.U.S. Media segment Adjusted OIBDA increased$48.6 million , or 60%, in the three months endedJune 30, 2022 , and increased$104.1 million , or 99%, in the six months endedJune 30, 2022 , compared to the same prior-year periods. Adjusted OIBDA margin was 31% in the three months endedJune 30, 2022 , 25% in the three months endedJune 30, 2021 , 27% in the six months endedJune 30, 2022 , and 19% in the same prior-year period. Other Three Months Ended Six Months Ended June 30, % June 30, % (in millions, except percentages) 2022 2021 Change 2022 2021 Change Revenues: Billboard$ 21.9 $ 15.5 41 %$ 36.7 $ 26.6 38 % Transit and other 5.8 3.7 57 10.3 6.4 61 Total revenues$ 27.7 $ 19.2 44$ 47.0 $ 33.0 42 Organic revenues(a): Billboard$ 21.9 $ 15.0 46$ 36.7 $ 26.1 41 Transit and other 5.8 3.6 61 10.3 6.3 63 Total organic revenues(a) 27.7 18.6 49 47.0 32.4 45 Non-organic revenues: Billboard - 0.5 * - 0.5 * Transit and other - 0.1 * - 0.1 * Total non-organic revenues - 0.6 * - 0.6 * Total revenues 27.7 19.2 44 47.0 33.0 42 Operating expenses (14.3) (12.8) 12 (27.7) (24.3) 14 SG&A expenses (5.6) (4.8) 17 (10.9) (9.1) 20 Adjusted OIBDA$ 7.8 $ 1.6 *$ 8.4 $ (0.4) * Adjusted OIBDA margin 28 % 8 % 18 % (1) % Operating income (loss)$ 4.8 $ 1.5 *$ 2.4 $ (3.4) * Net gain on dispositions - (3.0) (100) - (3.0) (100) Depreciation and amortization 3.0 3.1 (3) 6.0 6.0 - Adjusted OIBDA$ 7.8 $ 1.6 *$ 8.4 $ (0.4) * * Calculation is not meaningful. 35
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(a)Organic revenues exclude the impact of foreign currency exchange rates ("non-organic revenues").
Total Other revenues increased$8.5 million , or 44%, in the three months endedJune 30, 2022 , and increased$14.0 million , or 42%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, reflecting an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services.
In the three and six months ended
Other operating expenses increased$1.5 million , or 12%, in the three months endedJune 30, 2022 , and increased$3.4 million , or 14%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily driven by higher expenses inCanada . Other SG&A expenses increased$0.8 million , or 17%, in the three months endedJune 30, 2022 , and increased$1.8 million , or 20%, in the six months endedJune 30, 2022 , compared to the same prior-year periods, primarily driven by higher expenses inCanada . Other Adjusted OIBDA increased$6.2 million in the three months endedJune 30, 2022 , compared to the same prior-year period, due primarily to an increase in average revenue per display (yield). Other Adjusted OIBDA was$8.4 million in the six months endedJune 30, 2022 , compared to an Adjusted OIBDA loss of$0.4 million in the same prior-year period, due primarily to an increase in average revenue per display (yield).
Corporate
Corporate expenses primarily include expenses associated with employees who provide centralized services. Corporate expenses, excluding stock-based compensation, were$11.7 million in the three months endedJune 30, 2022 , compared to$12.2 million in the same prior-year period, primarily due to the impact of market fluctuations on an equity-linked retirement plan offered by the Company to certain employees, partially offset by higher compensation-related expenses, including salaries, and higher professional fees. Corporate expenses, excluding stock-based compensation, were$22.2 million in the six months endedJune 30, 2022 , compared to$23.7 million in the same prior-year period, primarily due to the impact of market fluctuations on an equity-linked retirement plan offered by the Company to certain employees, partially offset by higher compensation-related expenses, including salaries and bonuses, and higher professional fees. 36
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Liquidity and Capital Resources
As of
June 30, December 31, (in millions, except percentages) 2022 2021 % Change
Assets:
Cash and cash equivalents$ 117.0 $ 424.8 (72) %
Receivables, less allowance (
288.4 310.5 (7) Prepaid lease and transit franchise costs 7.5 12.5 (40) Other prepaid expenses 20.1 17.8 13 Other current assets 8.8 11.7 (25) Total current assets 441.8 777.3 (43) Liabilities: Accounts payable 57.9 64.9 (11) Accrued compensation 54.4 74.5 (27) Accrued interest 30.8 30.7 - Accrued lease and transit franchise costs 58.9 60.1 (2) Other accrued expenses 45.4 40.3 13 Deferred revenues 41.9 30.9 36 Short-term operating lease liabilities 196.9 187.5 5 Other current liabilities 19.8 18.8 5 Total current liabilities 506.0 507.7 - Working capital$ (64.2) $ 269.6 (124) We continually project anticipated cash requirements for our operating, investing and financing needs as well as cash flows generated from operating activities available to meet these needs. Due to seasonal advertising patterns and influences on advertising markets, our revenues and operating income are typically highest in the fourth quarter, during the holiday shopping season, and lowest in the first quarter, as advertisers adjust their spending following the holiday shopping season. Further, certain of our municipal transit contracts require guaranteed minimum annual payments to be paid on a monthly or quarterly basis, as applicable. Our short-term cash requirements primarily include payments for operating leases, guaranteed minimum annual payments, interest, capital expenditures, equipment deployment costs and dividends. Funding for short-term cash needs will come primarily from our cash on hand, operating cash flows, our ability to issue debt and equity securities, and borrowings under the Revolving Credit Facility (as defined below), the AR Facility (as defined below) or other credit facilities that we may establish, to the extent available. In addition, as part of our growth strategy, we frequently evaluate strategic opportunities to acquire new businesses, assets or digital technology. Consistent with this strategy, we regularly evaluate potential acquisitions, ranging from small transactions to larger acquisitions, which transactions could be funded through cash on hand, additional borrowings, equity or other securities, or some combination thereof. Our long-term cash needs include principal payments on outstanding indebtedness and commitments related to operating leases and franchise and other agreements, including any related guaranteed minimum annual payments, and equipment deployment costs. Funding for long-term cash needs will come from our cash on hand, operating cash flows, our ability to issue debt and equity securities, and borrowings under the Revolving Credit Facility or other credit facilities that we may establish, to the extent available. Although we have taken several actions to date to preserve our financial flexibility and increase our liquidity, our short-term and long-term cash needs and related funding capability may be adversely affected by the impact of the COVID-19 pandemic and the current economic environment if cash on hand and operating cash flows decrease in 2022, and our ability to issue debt and equity securities and/or borrow under our existing or new credit facilities on reasonable pricing terms, or at all, may become uncertain. (See the "Overview" section of this MD&A.) Working capital was a deficit of$64.2 million as ofJune 30, 2022 , compared to working capital of$269.6 million as ofDecember 31, 2021 , is primarily driven by lower cash due to acquisitions (see Note 12. Acquisitions to the Consolidated 37
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Financial Statements) and lower accounts receivable balances due to seasonal advertising patterns and influences on advertising markets, partially offset by lower accrued compensation due to the timing of payments.
Under the MTA agreement, which was amended in
•Deployments. We must deploy, over a number of years, (i) 5,433 digital advertising screens onsubway and train platforms and entrances, (ii) 15,896 smaller-format digital advertising screens on rolling stock, and (iii) 9,283 MTA communications displays, subject to modification as agreed-upon by us and the MTA. We are also obligated to deploy certain additional digital advertising screens and MTA communications displays insubway and train stations and rolling stock that the MTA may build or acquire in the future (collectively, the "New Inventory"). After temporarily suspending deployment beginning in the first quarter of 2021, we have resumed deployment. •Recoupment of Equipment Deployment Costs. We may retain incremental revenues that exceed an annual base revenue amount for the cost of deploying advertising and communications displays throughout the transit system. As presented in the table below, recoupable MTA equipment deployment costs are recorded as Prepaid MTA equipment deployment costs and Intangible assets on our Consolidated Statement of Financial Position, and as these costs are recouped from incremental revenues that the MTA would otherwise be entitled to receive, Prepaid MTA equipment deployment costs will be reduced. If incremental revenues generated over the term of the agreement are not sufficient to cover all or a portion of the equipment deployment costs, the costs will not be recouped, which could have an adverse effect on our business, financial condition and results of operations. If we do not recoup all costs of deploying advertising and communications screens with respect to the New Inventory by the end of the term of the MTA Agreement, the MTA will be obligated to reimburse us for these costs. Deployment costs in an amount not to exceed$50.7 million , which are deemed authorized beforeDecember 31, 2020 , will be paid directly by the MTA. For any deployment costs deemed authorized afterDecember 31, 2020 , the MTA and the Company will no longer be obligated to directly pay 70% and 30% of the costs, respectively, and these costs will be subject to recoupment in accordance with the MTA Agreement. We did not recoup any equipment deployment costs in six months endedJune 30, 2022 , and it is unlikely we will recoup equipment deployment costs in the remainder of 2022. For the full year of 2022, we expect our MTA equipment deployment costs to be approximately$125.0 million . •Payments. We must pay to the MTA the greater of a percentage of revenues or a guaranteed minimum annual payment. Our payment obligations with respect to guaranteed minimum annual payment amounts owed to the MTA resumed onJanuary 1, 2021 , in accordance with the terms of the MTA Agreement, and any guaranteed minimum annual payment amounts that would have been paid for the period fromApril 1, 2020 throughDecember 31, 2020 (less any revenue share amounts actually paid during this period using an increased revenue share percentage of 65%) will instead be added in equal increments to the guaranteed minimum annual payment amounts owed for the period fromJanuary 1, 2022 , throughDecember 31, 2026 . The MTA Agreement also provides that if prior toApril 1, 2028 the balance of unrecovered costs of deploying advertising and communications screens throughout the transit system is equal to or less than zero, then in any year following the year in which such recoupment occurs (the "Recoupment Year"), the MTA is entitled to receive an additional payment equal to 2.5% of the annual base revenue amount for such year calculated in accordance with the MTA Agreement, provided that gross revenues in such year (i) were at least equal to the gross revenues generated in the Recoupment Year, and (ii) did not decline by more than 5% from the prior year. •Term. InJuly 2021 , we extended the initial 10-year term of the MTA Agreement to a 13-year initial term. We have the option to extend this initial 13-year term for an additional five-year period at the end of the 13-year initial term, subject to satisfying certain quantitative and qualitative conditions. We may utilize cash on hand and/or incremental third-party financing to fund equipment deployment costs over the next couple of years. However, given the uncertainty in the market around the severity and duration of the COVID-19 pandemic, we cannot reasonably estimate the aggregate financing amount, if any, at this time. As ofJune 30, 2022 , we have issued surety bonds in favor of the MTA totaling approximately$136.0 million , which amount is subject to change as equipment installations are completed and revenues are generated. We expect transit franchise expenses, as a percentage of revenues, to decrease in 2022 as compared to 2021, but be higher than pre-COVID-19 pandemic levels. (See the "Overview-COVID-19 Impact" section of this MD&A.) As indicated in the table below, we incurred$52.4 million related to MTA equipment deployment costs in the six months endedJune 30, 2022 (which includes equipment deployment costs related to future deployments), for a total of$499.4 million to date, of which$33.9 million had been recouped from incremental revenues to date and as ofJune 30, 2022 ,$49.1 million has been funded by the MTA. As ofJune 30, 2022 , 13,161 digital displays had been installed, composed of 4,749 digital advertising screens onsubway and train platforms and entrances, 4,292 smaller-format digital advertising screens on rolling stock and 4,120 MTA communications displays. In the three months endedJune 30, 2022 , 682 installations occurred, for a total of 2,069 installations occurring in the six months endedJune 30, 2022 . 38
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Table of Contents Beginning Deployment Costs Recoupment/MTA (in millions) Balance Incurred Funding Amortization Ending Balance Six months endedJune 30, 2022 : Prepaid MTA equipment deployment costs$ 279.8 $ 48.1 $ - $ -$ 327.9 Other current assets 5.2 0.1 (3.7) - 1.6 Intangible assets (franchise agreements) 63.0 4.2 - (2.5) 64.7 Total$ 348.0 $ 52.4 $ (3.7)$ (2.5) $ 394.2 Year endedDecember 31, 2021 : Prepaid MTA equipment deployment costs$ 204.6 $ 75.2 $ - $ -$ 279.8 Other current assets 28.0 6.2 (29.0) - 5.2 Intangible assets (franchise agreements) 58.4 14.5 - (9.9) 63.0 Total$ 291.0 $ 95.9 $ (29.0)$ (9.9) $ 348.0 OnAugust 3, 2022 , we announced that our board of directors approved a quarterly cash dividend of$0.30 per share on our common stock, payable onSeptember 30, 2022 , to stockholders of record at the close of business onSeptember 2, 2022 .
Debt
Debt, net, consists of the following:
As ofJune 30 ,
(in millions, except percentages) 2022 2021 Long-term debt: Term loan, due 2026$ 598.4 $
598.2
Senior unsecured notes:
6.250% senior unsecured notes, due 2025 400.0
400.0
5.000% senior unsecured notes, due 2027 650.0
650.0
4.250% senior unsecured notes, due 2029 500.0
500.0
4.625% senior unsecured notes, due 2030 500.0
500.0
Total senior unsecured notes 2,050.0
2,050.0
Debt issuance costs (25.1)
(27.6)
Total long-term debt, net 2,623.3 2,620.6 Total debt, net$ 2,623.3 $ 2,620.6
Weighted average cost of debt 4.6 % 4.3 % Payments Due by Period (in millions) Total 2022 2023-2024 2025-2026 2027 and thereafter Long-term debt$ 2,650.0 $ - $ -$ 1,000.0 $ 1,650.0 Interest 762.7 124.8 245.3 207.8 184.8 Total$ 3,412.7 $ 124.8 $ 245.3 $ 1,207.8 $ 1,834.8 Term Loan The interest rate on the term loan due in 2026 (the "Term Loan") was 3.4% per annum as ofJune 30, 2022 . As ofJune 30, 2022 , a discount of$1.6 million on the Term Loan remains unamortized. The discount is being amortized through Interest expense, net, on the Consolidated Statement of Operations. 39
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Revolving Credit Facility
We also have a
As of
The commitment fee based on the amount of unused commitments under the Revolving Credit Facility was$0.4 million in the three months endedJune 30, 2022 ,$0.5 million in the three months endedJune 30, 2021 ,$0.8 million in the six months endedJune 30, 2022 , and$0.9 million in the six months endedJune 30, 2021 . As ofJune 30, 2022 , we had issued letters of credit totaling approximately$4.1 million against the letter of credit facility sublimit under the Revolving Credit Facility.
Standalone Letter of Credit Facilities
As of
Accounts Receivable Securitization Facility
As of
OnJune 1, 2022 , the Company, certain subsidiaries of the Company andMUFG Bank, Ltd. ("MUFG") entered into an amendment to the agreements governing the AR Facility, pursuant to which the Company (i) increased the borrowing capacity under the AR Facility from$125.0 million to$150.0 million ; (ii) extended the term of the AR Facility so that it now terminates onMay 30, 2025 , unless further extended; and (iii) increased the delinquency and termination ratios under the AR Facility for the tenure of the agreements to provide additional flexibility to the Company. The amendment to the agreements governing the AR Facility do not change how we account for the AR Facility as a collateralized financing activity. In connection with the AR Facility,Outfront Media LLC andOutfront Media Outernet Inc. , each a wholly-owned subsidiary of the Company, and certain of the Company's TRSs (the "Originators"), will sell and/or contribute their respective existing and future accounts receivable and certain related assets to eitherOutfront Media Receivables LLC , a special purpose vehicle and wholly-owned subsidiary of the Company relating to the Company's qualified REIT subsidiary accounts receivable assets (the "QRS SPV") orOutfront Media Receivables TRS, LLC a special purpose vehicle and wholly-owned subsidiary of the Company relating to the Company's TRS accounts receivable assets (the "TRS SPV" and together with the QRS SPV, the "SPVs"). The SPVs may transfer undivided interests in their respective accounts receivable assets to certain purchasers from time to time (the "Purchasers"). The SPVs are separate legal entities with their own separate creditors who will be entitled to access the SPVs' assets before the assets become available to the Company. Accordingly, the SPVs' assets are not available to pay creditors of the Company or any of its subsidiaries, although collections from the receivables in excess of amounts required to repay the Purchasers and other creditors of the SPVs may be remitted to the Company.Outfront Media LLC will service the accounts receivables on behalf of the SPVs for a fee. The Company has agreed to guarantee the performance of theOriginators andOutfront Media LLC , in its capacity as servicer, of their respective obligations under the agreements governing the AR Facility. Neither the Company, the Originators nor the SPVs guarantee the collectability of the receivables under the AR Facility. Further, the TRS SPV and the QRS SPV are jointly and severally liable for their respective obligations under the agreements governing the AR Facility. As ofJune 30, 2022 , there were no outstanding borrowings under the AR Facility. As ofJune 30, 2022 , borrowing capacity remaining under the AR Facility was$150.0 million based on approximately$319.7 million of accounts receivable that could be used as collateral for the AR Facility in accordance with the agreements governing the AR Facility. The commitment fee based on the amount of unused commitments under the AR Facility was immaterial for each of the three and six months endedJune 30, 2022 and 2021.
Debt Covenants
Our credit agreement, dated as ofJanuary 31, 2014 (as amended, supplemented or otherwise modified, the "Credit Agreement"), governing the Senior Credit Facilities, the agreements governing the AR Facility, and the indentures governing our senior unsecured notes contain customary affirmative and negative covenants, subject to certain exceptions, including but not limited to those that restrict the Company's and its subsidiaries' abilities to (i) pay dividends on, repurchase or make distributions in respect to the Company's or its wholly-owned subsidiary,Outfront Media Capital LLC's capital stock or make 40
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other restricted payments other than dividends or distributions necessary for us to maintain our REIT status, subject to certain conditions and exceptions, (ii) enter into agreements restricting certain subsidiaries' ability to pay dividends or make other intercompany or third-party transfers, and (iii) incur additional indebtedness. One of the exceptions to the restriction on our ability to incur additional indebtedness is satisfaction of a Consolidated Total Leverage Ratio, which is the ratio of our consolidated total debt to our Consolidated EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters, of no greater than 6.0 to 1.0. As ofJune 30, 2022 , our Consolidated Total Leverage Ratio was 5.1 to 1.0 in accordance with the Credit Agreement. The terms of the Credit Agreement (and under certain circumstances, the agreements governing the AR Facility) require that we maintain a Consolidated Net Secured Leverage Ratio, which is the ratio of (i) our consolidated secured debt (less up to$150.0 million of unrestricted cash) to (ii) our Consolidated EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters, of no greater than 4.5 to 1.0. As ofJune 30, 2022 , our Consolidated Net Secured Leverage Ratio was 0.9 to 1.0 in accordance with the Credit Agreement. As ofJune 30, 2022 , we are in compliance with our debt covenants.
Deferred Financing Costs
As ofJune 30, 2022 , we had deferred$27.6 million in fees and expenses associated with the Term Loan, Revolving Credit Facility, AR Facility and our senior unsecured notes. We are amortizing the deferred fees through Interest expense, net, on our Consolidated Statement of Operations over the respective terms of the Term Loan, Revolving Credit Facility, AR Facility and our senior unsecured notes. Interest Rate Swap Agreement We had an interest rate cash flow swap agreement to effectively convert a portion of our LIBOR-based variable rate debt to a fixed rate and hedge our interest rate risk related to such variable rate debt, which matured inJune 2022 . The fair value of this swap position was a net liability of approximately$0.4 million as ofDecember 31, 2021 , and is included in Other current liabilities on our Consolidated Statement of Financial Position.
Equity
At-the-Market Equity Offering Program
We have a sales agreement in connection with an "at-the-market" equity offering program (the "ATM Program"), under which we may, from time to time, issue and sell shares of our common stock up to an aggregate offering price of$300.0 million . We have no obligation to sell any of our common stock under the sales agreement and may at any time suspend solicitations and offers under the sales agreement. No shares were sold under the ATM Program during the six months endedJune 30, 2022 . As ofJune 30, 2022 , we had approximately$232.5 million of capacity remaining under the ATM Program.
Series A Preferred Stock Issuance
OnApril 20, 2020 , we issued 400,000 shares of our Series A Convertible Perpetual Preferred Stock (the "Series A Preferred Stock"), par value$0.01 per share. The Series A Preferred Stock ranks senior to the shares of the Company's common stock with respect to dividend and distribution rights. Holders of the Series A Preferred Stock are entitled to a cumulative dividend accruing at the initial rate of 7.0% per year, payable quarterly in arrears, subject to increases as set forth in the Articles Supplementary, effective as ofApril 20, 2020 (the "Articles"). Dividends may, at the option of the Company, be paid in cash, in-kind, through the issuance of additional shares of Series A Preferred Stock or a combination of cash and in-kind, untilApril 20, 2028 , after which time dividends will be payable solely in cash. So long as any shares of Series A Preferred Stock remain outstanding, the Company may not, without the consent of a specified percentage of holders of shares of Series A Preferred Stock, declare a dividend on, or make any distributions relating to, capital stock that ranks junior to, or on a parity basis with, the Series A Preferred Stock, subject to certain exceptions, including but not limited to (i) any dividend or distribution in cash or capital stock of the Company on or in respect of the capital stock of the Company to the extent that such dividend or distribution is necessary to maintain the Company's status as a REIT; and (ii) any dividend or distribution in cash in respect of our common stock that, together with the dividends or distributions during the 12-month period immediately preceding such dividend or distribution, is not in excess of 5% of the aggregate dividends or distributions paid by the Company necessary to maintain its REIT status during such 12-month period. If any dividends or distributions in respect of the shares of our common stock are paid in cash, the shares of Series A Preferred Stock will participate in the dividends or distributions on an as-converted basis up to the amount of their accrued dividend for such quarter, which amounts will reduce the dividends payable on the shares of Series A Preferred Stock dollar-for-dollar for such quarter. The Series A Preferred Stock is convertible at the option of any holder at any time into shares of our common stock at an initial conversion price of$16.00 per share and an initial conversion rate of 62.50 shares of our common stock per share of Series A Preferred Stock, subject to certain anti-dilution 41
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adjustments and a share cap as set forth in the Articles. Subject to certain conditions set forth in the Articles (including a change of control), each of the Company and the holders of the Series A Preferred Stock may convert or redeem the Series A Preferred Stock at the prices set forth in the Articles, plus any accrued and unpaid dividends. OnMarch 1, 2022 , 275,000 shares of Series A Preferred Stock were converted into approximately 17.4 million shares of the Company's common stock, which included$3.2 million of accrued and unpaid dividends through and including the conversion date that were settled in the Company's common stock in accordance with the Articles. As ofJune 30, 2022 , the maximum number of shares of common stock that could be required to be issued on conversion of the outstanding shares of Series A Preferred Stock was approximately 7.8 million shares.
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