OUTFRONT Media Inc. (OUT) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the OUTFRONT Media Annual Meeting of Stockholders. I will now turn the call over to the CEO and Chairman of the Board, Jeremy J. Male. Jeremy, you may begin.

Thanks, operator, and good morning, ladies and gentlemen. Will the meeting please come to order? I want to welcome all of you to the OUTFRONT Media Inc. Annual Meeting of Stockholders, which is being hosted virtually due to the COVID-19 pandemic and related concerns about health and safety of all attendees and the community at large. I'm Jeremy Male, CEO and Chairman of the Directors of OUTFRONT Media, and I'll be the Chair of this meeting. The following members of the Board of Directors are also present at this meeting. Nicolas Brien; Angela Courtin; Manuel A. Diaz; Peter Mathes, Chair of the Compensation Committee; and Joe Wender, Lead Independent Director and Chair of the Audit Committee. In addition, present from management are Matthew Siegel, Executive Vice President and Chief Financial Officer; Richard Sauer, Executive Vice President and General Counsel; Clive Punter, Executive Vice President and Chief Revenue Officer; Jodi Senese, Executive Vice President and Chief Marketing Officer; Andrew Sriubas, Executive Vice President and Chief Commercial Officer; Nancy Tostanoski, Executive Vice President and Chief Human Resources Officer; Greg Lundberg, Senior Vice President, Investor Relations; and Louis Capocasale, Corporate Secretary, who will act as secretary of the meeting. Peter Descovich of IOE Services Inc will act as inspector of election for this meeting and has taken an oath of office as inspector of election. Amy Owens of PricewaterhouseCoopers LLP, our independent registered public accounting firm, is also present. Following the formal meeting, you will have the opportunity to ask questions. Another formal portion of the meeting, upon entering our virtual meeting website, each of you should see the agenda and rules of conduct for this virtual annual meeting, along with other materials. To conduct an orderly meeting, we ask that participants abide by these rules. [Operator Instructions] Any recording or retransmission of the meeting is prohibited. Copying of materials presented at the meeting is also prohibited, including screenshots. Thank you for your cooperation with these rules. We will now move on to the proof of notice of the meeting. The secretary of the meeting has delivered an affidavit of mailing, establishing that notice of this meeting was duly given. A copy of the notice of meeting and the affidavit of mailing will be incorporated into the minutes of this meeting. All stockholders of record at the close of business on April 9, 2020, are entitled to vote at this annual meeting. Our first order of business at this meeting is to determine whether the shares represented at the meeting, either in person or by proxy, are sufficient to constitute a quorum for the purpose of transacting business. Secretary, do you have a report?

Yes. The stockholders list shows that holders of 144,353,374 shares of common stock of OUTFRONT Media Inc. are entitled to vote at this meeting. There are represented in person via webcast or by proxy, at least 135,749,999 shares of common stock or approximately 94% of all of the shares entitled to vote at this meeting.

Thank you. Because stockholders entitled to cast the majority of all the votes entitled to be cast at this meeting are present in person or by proxy, I declare a quorum to be present and this meeting to be duly convened for purposes of transacting such business as may properly come before it. We'd now like to make a brief presentation regarding our business and performance. But before I do, our Corporate Secretary will provide our safe harbor statement.

Thank you, Jeremy. Before we begin, I need to advise you that this presentation may contain forward-looking statements. Relevant factors that could cause actual results to differ materially from these forward-looking statements are listed in our SEC filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q. In addition, we may refer to certain non-GAAP financial measures. Please refer to our SEC filings, earnings releases and investor presentations located on our website, outfrontmedia.com, for reconciliations of these non-GAAP financial measures to GAAP financial measures.

Thank you. So I'd like to start today by highlighting some of the important actions we began taking in March. First and foremost, the majority of our people were moved to a remote work environment. For employees who remained in the field to do the essential work of changing our advertisements and attending to our assets, we put appropriate protective safety measures in place. Along with the rest of the country, we are now preparing for enhanced employee safety as we plan on a return to the office environment. Financially, we executed quickly on many operational and capital markets initiatives. On the operations side, we implemented many cost reductions that focused on rightsizing our business for the current environment. We also began addressing our fixed cost base, including billboard leases and transit franchise payments. And we halted our acquisition and capital deployment activities at this time. On the financing side, we immediately drew down the balance of our revolving credit facility to put nearly $500 million of cash into our accounts, the majority of which was repaid in connection with the issuance of $400 million of senior notes in May. We also brought in new strategic partners through the issue of $400 million of preferred stock to Providence Equity Partners and Ares Management. We also temporarily amended the net secured maintenance ratio covenant of our credit agreement and certain ratio covenants relating to our accounts receivable facilities. All of these actions were a proactive and prudent response to a situation whose severity and duration is unknown. And that is why we made the decision to suspend our quarterly dividend distributions until we have a better view on the recovery. Make no mistake, we're a REIT and plan to remain so and will, therefore, be a significant dividend payout. All we have done is temporarily paused the amount of cash leaving our balance sheet. While the news you read this morning might sound optimistic for the country reopening, there is still risk to the state of the economy when everyone attempts to return to normal life. On our earnings call on May 2020, we guided for our second quarter total revenues to be down 50%. We are not reaffirming our earlier guidance today, but we wanted to highlight that COVID-19 pandemic and the related preventative measures to help curb the spread throughout the markets in which we do business has had, and may continue to have, a significant impact on the global economy and therefore, our business. Like you, we hope the recovery is quick, but no one knows. We believe that it was prudent to take all these steps to protect the company and also to emerge from the recovery with enhanced financial flexibility to pursue strategic options that we believe will arise. Now let's turn to some numbers. I'm beginning with a slide to remind you of where we've been with 2 years of some very strong performance. We began feeling the impacts of the COVID-19 pandemic in mid-March, which reduced the strong growth rates we experienced in 2019. While historical growth is less significant at the moment than how the pandemic is impacting our business, it's important to remember that out of home is very in demand by advertisers and OUTFRONT's assets in particular. Both our traditional and digital displays have had terrific performance. Digital, as you see here, has been particularly strong. Our first quarter digital revenues were up nearly 40% and represented 22% of our business. Although we expect a temporary setback from the pandemic, digital remains a significant growth driver for the company. Our strong growth rates enhanced by digital had been driving outperformance in our stock price until the pandemic hit in March. As you can see here, we have since underperformed the S&P 500 due to our urban and transit system mix. These have been strong growth drivers for our company, and we believe, absolutely, that they will be again. But they will likely be slower to recover than our billboard business. And our business is indeed starting to recover as we look forward. This chart shows the daily average audience that is passing our billboards and street-level transit on a national level. As you can see, we have recovered over 80% of the pre-pandemic audience levels. This is very encouraging. Certain markets like the big cities on the East and West Coast in our transit business, in particular, will be slower to recover and are not yet at these levels. While there is no linear link between audience and revenue, we expect that the shape of their recovery curves will be similar. As we think about the future and what our advertising clients need to accomplish, we believe that we remain in the best strategic position, and that position is the one with the best people and the best assets. And the last thing I would like to highlight today is that we took several important steps operationally and financially to enhance our liquidity and financial flexibility. It was important to ensure that we have the wherewithal to respond defensively to the economic uncertainty and to prepare for the business recovery with an enhanced position to pursue strategic options that we believe will arise to the benefits of our shareholders. We thank you for your ongoing support as shareholders and for taking the time to join today's meeting. So the next order of business is a description of the matters to be voted on at today's meeting. As a reminder, if you are a stockholder of record or a proxy holder for a stockholder of record, you may vote on our virtual meeting website in the -- at the place indicated. If you previously voted by proxy, you do not need to vote today unless you wish to change your vote. The first proposal before the stockholders is the election of 2 Class III Directors to serve until the Annual Meeting of Stockholders in 2022 and until their successors are duly elected and qualified. The Board of Directors of OUTFRONT Media has nominated and recommends that stockholders vote for the election of myself, Jeremy Male; and Joseph Wender as Directors of the company. The second proposal before the stockholders is the ratification of the appointment of PricewaterhouseCoopers LLP to serve as OUTFRONT Media's independent registered public accounting firm for the fiscal year ending December 31, 2020, as described in the proxy statement. The Board of Directors of OUTFRONT Media recommends that stockholders vote for ratification of the appointment of PricewaterhouseCoopers LLP. The third proposal before the stockholders is the approval of a nonbinding advisory basis of the compensation of our named executive officers as described in the proxy statement. The Board of Directors of OUTFRONT Media recommends that stockholders vote for, on a nonbinding advisory basis, approval of the compensation of our named executive officers. [Operator Instructions] During the question-and-answer period to follow we will take those questions. Again, if you have already voted by proxy, you need not vote today unless you would like to change your vote. Assuming there are no questions on proposals or voting process, I hereby declare the polls closed and the inspector of election is instructed to prepare the final voting tabulation after the end of the meeting. Will the Corporate Secretary please report the preliminary results of the voting?

The nominees for Director have each received the affirmative vote of a majority of the votes cast. The ratification of the appointment of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for fiscal year 2020 has received the affirmative vote of a majority of the votes cast on such proposal. And the Say-on-Pay proposal has received the affirmative vote of a majority of the votes cast on such proposal.

Thank you. Based on these results, the nominees for election to the Board of Directors, myself, Jeremy Male and Joseph Wender, have been duly elected. The appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm has been ratified and the compensation of our named executive officers has been approved. The final voting tabulation will be reflected in the minutes of this meeting and filed with the SEC in their current report on Form 8-K. That concludes the formal portion of the meeting, which is now adjourned. We will now turn to the question-and-answer portion of the meeting and respond to questions that have been submitted on the virtual meeting website during this meeting. Please note that we will respond to only one question from a single stockholder, and we reserve the right to rule out of order or not respond to questions or comments that become repetitive or if a particular viewpoint has been adequately expressed. If you have other questions or comments or if a question posed was not otherwise answered, you may contact our investor relations department after the meeting at [email protected].

So far, I've had 2 questions submitted to me on the website. The first is what effect will fewer car drivers have on revenue? And the second is, what effect will the elimination of funds at stadium events have on revenue? So I think in a way we can probably take both of those questions together. With regards to stadium revenue per se, we don't advertise in stadiums, so that isn't the issue. The issue has been more that in general, whether or not people have been attending stadiums or indeed a workplace or other leisure activities, audience levels have dropped for the out-of-home industry in general, and in particular, in New York and -- obviously, the center of the pandemic, and to a lesser extent, in some of the other major urban centers such as L.A. Less people to advertise to do -- does impact our revenues. So we have had to grapple with not only a weaker macro environment, but also that absence of audience. And both of those factors were reflected in the guidance that we gave for Q2. Are there any other questions at this time?

Jeremy, there are no further questions at this time.

Thank you, Greg. And I want to thank all of you for attending today's meeting. Thanks very much and have a great rest of day.

All right. Ladies and gentlemen, this does conclude your call. You may now disconnect your lines.