OOH…Here’s One Thing
9 to 5
by Jim Johnsen,
Managing Director, Johnsen, Fretty & Company
“With my doctor, I don’t get NO RESPECT. I told him I want a vasectomy. He said with a face like mine, I don’t need one.” Rodney Dangerfield
Is it just me…or did the news of National CineMedia’s (“NCM”) acquisition of Captivate Advertising (“Captivate”) fall like a small tree in the forest? Barry and DPAA aside, when was the last time anyone in the Outdoor business busted out the New Orleans Brass Band for “place-based,” for that matter?
$275 million greenbacks for an elevator/lobby network focused on selling working stiff impressions to national advertisers. Anyone remember that Gannett bought Captivate from the founding investors somewhere in the $30-40 million range? The founding investors took a $ 100MM-plus haircut. Then Gannett dumped it to Generation Partners in 2013 for next to nothing. Talk about a walk through the Gobi desert to find Atlantis!
Great deal for Generation Partners and management. NCM? Captivate boasts 26,000 screens in 11,000 venues. That means NCM paid $25,000 per venue or roughly $10,600 per screen. But wait, let’s go a little deeper. 90% of Captivate’s revenue comes from 1,600 screens in Class A and B office buildings. If we allocate 90% of the purchase price to these screens, it means NCM paid approximately $155,000 per elevator.
Johnsen, you sure your math is even a little correct? $155k per screen feels like a billboard deal!
Having fun yet? Let’s keep going. Captivate generated $64MM of revenue and $19MM of EBITDA in 2025. NCM says it’s a 10x (adjusted) EBITDA deal. That means NCM believes it’s getting $27.5MM of EBITDA. If we reverse the 29% operating margin, it tells us NCM should be getting about $93MM of revenue, and paying about 2.96x revenue for Captivate. 3x revenue/10x EBITDA for a billboard transaction…honey, back the truck up.
Hold on, not so fast. 90% of $93MM on 1,600 screens? That means each elevator is turning $52,300 per year, up from $36,000 in 2025? Wow, if my numbers are even just directionally right…we got ourselves a regular Ben Hur down here. (In case the reference is lost:
https://youtu.be/jq5VcfiL2Ds?si=3a8j6MbuaoRZU262 …and the first 30 seconds will bring you back.)
Alright, Johnsen, thanks for taking us into the superficial data world, but was it a good deal or not? Well, on the one hand, it doesn’t seem to me like movie-theater eyeballs and office-building impressions have a lot to do with each other. So I am still wrapping my head around the rationale. And if we hit another pandemic and go back to remote work…well, think of Edvard Munch’s “The Scream”.
On the other hand, if Bloomberg’s rumor mill is right and Mid Ocean Partners paid over $500MM for GSTV, which at the time was probably at or below $100MM of revenue (educated guess)…or if rumors say Advent International paid a premium to billboard multiples for PatientPoint (https://patientpoint.com/) in the fourth quarter of 2025…then perhaps NCM is on to something big.
Look, Barry Frey is a much better cheerleader for place-based and retail than I am. In fact, his organization, DPAA, was founded by Captivate’s first CEO. That said, I am excited to see more great things coming out of the non-traditional billboard world in 2027.
Let’s give ’em some respect.
…And I couldn’t pen this little gibberish without a shout-out to Dolly Parton. We can only ponder how many amazing ways she changed the world for the better. Now get to it!
https://youtu.be/UbxUSsFXYo4?si=89Qr4cwT1q4HPbQC
Primary source:
https://investor.ncm.com/news-releases/news-release-details/national-cinemedia-inc-acquire-captivate-275-million-creating
JJ
jfco.com
Securities transacted through StillPoint Capital Member firm FINRA/SiPC