Sees Better Advertising Market Ahead
On July 15, 2002, Obie Media reported that earnings are holding up fairly well and the weak advertising market may have bottomed out. The company reported flat revenue from billboard advertising for the first six months of its current fiscal year that ends November 30, 2002. During the six months of 2002, the company reported billboard revenue of $3,690,378. This is essentially unchanged from $3,654,487 in the same period of 2001. However, billboard income became a larger percentage of total revenue this year because the transit side of their business dropped sharply. Obie had an early termination of a major transit contract with the City of Chicago. With that revenue no longer coming in, the billboard side of the business rose from 13% of sales to 19% of sales. Since the company continues to focus on growing the transit business, billboards are unlikely to be a higher percentage of revenue in the future.
In the second quarter of 2002, total gross revenue was down from $18,758,619 in 2001 to $12,185,180 this year. The drop was due to the discontinued Chicago contract. The Operating Loss during this three-month period increased from $23,850 in 2001 to $205,400 this year. This decline was also due to the loss of the Chicago business. If the effects of the Chicago contract are removed, management reports that earnings actually improved this year. The improvement can be seen in earnings before interest, taxes, depreciation and amortization (EBITDA), according to Gary Livesay, Vice President and Chief Financial Officer.
Getting to the EBITDA line, I want to talk a little bit about that for a moment. The EBITDA for the three months ended May, was approximately $314,000 compared to $482,000 a year ago. And I’d like to point out that, if we factor the Chicago operation out of the three months ended May last year, we would actually have reported an EBITDA loss of $288,000 for the second quarter a year ago. So, approximately a $600,000 improvement, excluding Chicago, on a quarter-to-quarter basis from a year ago. And on a year-to-date basis, the six months, we reported an EBITDA loss of $315,000 this year, versus $92,000 last year. And again, factoring out the impact of the Chicago operation, we would have reported an EBITDA loss of $434,000 last year, or about a $120,000 improvement in that situation this year.
Looking at overall spending in billboard and transit media markets, Brian Obie, Chairman and Chief Executive Officer believes better times lie ahead.
We – as an industry, I think we’re experiencing certainly a bottoming out of the national business, large national customers. Maybe a slight up-trend, perhaps more later in the year, than there has been in the first six months, at least that’s what we’re experiencing as a company. We see some encouraging signs in that regard, for the future. The first six months were just okay, we’re a little more optimistic about what’s ahead and what’s based on contracts in the door.
Mr. Obie went on to confirm that the billboard side of the business is basically even with last year. “We were ahead a little bit in the first quarter (through February 2002), just slightly behind in the second quarter, just marginally. But, pretty much flat with last year.”
Like other companies with billboards, Obie Media has had more stable revenue from its rural and small town locations that carry ads from local businesses. National advertising expenditures tend to be much more volatile. According to Mr. Obie,
Our local business on the billboard side, because it’s tourist highway oriented, a lot of it is tied with long-term contracts, seem to be holding up well. The national in the first six months fluctuated a great deal. It got stronger late in the quarter, in the month of May, as did the transit side.
While many people in the outdoor advertising industry have been hoping for increased advertising spending, there is not much hard evidence that there is a bright light at the end of the tunnel. The federal government revised economic data that showed Gross Domestic Product actually declining in three quarters during 2001. Prior reports had indicated that negative GDP occurred only in one quarter last year. The revised figures now qualify the downturn as an official economic recession (two or more consecutive quarters of declining production). And the medium-term outlook is not good according to The Economist magazine. That highly regarded publication sees worldwide ad spending declining through 2003 at a minimum.