Ken Altena, Partner, Billboard Loans.
I have 35 years experience lending to out of home companies. My Billboard Loans business partner Dave Westburg and I were reviewing one of our old out of home lending white papers and decided to write an article on how the out of home business has changed since 2000.
More big roadside signs.
Look at these OAAA figures for roadside bulletins and posters for the past 24 years. The figures leave out place-based and transit signs, which have increased dramatically in that time. The number of Bulletins (including digitals) has increased by 87%. Posters are down 36%. Jr. Posters are down 86%. Murals are a small percentage of the current total, and I don’t think they were tracked in 2000.
Slower revenue growth
We computed billboard revenue growth for the 10 years ended 2000 and the 10 years ended 2024 and found this.
Annual billboard revenue growth 1990-2000: 5.4%
Annual billboard revenue growth 2014-2024: 3.6%
This is roadside billboards only and leaves out transit, place-based, and street furniture. Both time periods had an event which disrupted out of home growth. 1990-2000 had the recession following the dot-com crash. Out of home recovered strongly with several years of 8% average growth. 2014-2024 had the covid recession. Billboards made up the ground lost in covid but have grown at a relatively slow 3-5% rate since then.
Out of home lenders come and go.
In 2000, there were 6 specialty lenders making small out of home loans: Citizens Bank, Courtesy Leasing, Midwest Bankers Group (now Stark Capital), Silicon Bank, YESCO Finance and Westburg Media Capital (now Billboard Loans). Only three of these lenders (Billboard Loans, Stark Capital and YESCO) are lending to out of home 25 years later. Citizens no longer has a small out of home specialty practice. Courtesy and Silicon Bank exited the business. Today, small out of home companies are well-served by several specialty lenders: Alerus Financial, Billboard Loans, Verde Capital, Stark Capital Group and YESCO Finance.
The lesson of the past is that you should get to know many out of home lenders even if you have a good lending relationship because times and lenders change.
Lending multiples have stayed the same.
Billboard lending multiples have stayed at approximately 4-6 times cashflow (earnings before interest, depreciation and amortization) for 25 years. Lending multiples haven’t risen because of the slow growth rate of revenue. Growing revenues allow a business to amortize more debt faster.
Valuation has switched from a revenue multiple to a billboard cashflow multiple.
25 years ago many out of home companies were valued at 4-5 times revenue. Today the multiple is 10-12 times billboard cashflow (revenue less lease costs, permit costs, taxes, utilities and an imputed sales commission). A billboard cashflow multiple is a smarter way to value things because it takes operating expenses into account. A plant with high maintenance costs or high lease costs shouldn’t be worth as much as a plant which is brand new or has great leases.
