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

Nick Brien of OUTFRONT Media with us here today. Thank you for joining us.

Thank. You for inviting me.

This has been the first time you've come to this conference.

It has. Great. Yes. Thank you.

So I wanted to start with just a super easy one because your background is a little bit unique and I think might inform the discussion. Just give us two sentences on what you did prior to becoming CEO of OUTFRONT.

Okay. I've been always in the media marketing industry, but always on the agency side. So some would say, I'm now the poacher turned gamekeeper. It's the first time, let's say, on the supply side, on the sell side. But I've always been a big fan of the out-of-home medium. I always felt that there was a lot of potential that strategically wasn't optimized maybe because of the marketing and the positioning but also because of the sales approach. So I've been on the Board of OUTFRONT for 10 years. I took over as Interim CEO on February 7. And after a 6-, 7-month period, we decided that both parties, the Board and myself decided to maybe [indiscernible].

Did you recuse yourself from the Board? No, I'm just kidding. Okay. So what is that, 9 months, something like that, that you've been in the seat?

Yes. [ 7 ].

Maybe I'm not at math. Okay. What are your key priorities at OUTFRONT?

Drive revenue, improve profitability and create a winning culture. And if I break that down, this has been the year I've agreed with the Board, the year 1, this year has been the year of transformation. Year 2, when we talk about 2026, is a year of expansion. So I focused and agreed with the Board, there were 4 strategic imperatives for this year, and those were very much concentrated in changing the ways of working and those kind of significant approaches that reflected in recently the restructuring of the company on the sales side of the business. It was about driving new demand and focusing much more significantly on the enterprise side of the business, enterprise advertisers, who I feel have been largely neglected out of the out-of-home industry. It was to ensure that all things digital and not just on digital demand and digital sales, but our ad tech stack, our data sets and really ensuring that all things and the approaches to the way we even work with the agencies, not just the big multinational global agencies that I ran, but the growth of the independent digital agencies in the U.S. And the fourth was operational excellence everywhere, which was obviously workflow, automation, AI leverage and just making sure that the underpinnings for every aspect of the business have been -- are world-class. And that has been very much the focus. We saw the -- not any -- people have been asking me about the change in the sales organization for now 2 CROs. There's 1 CRO that's focused on the enterprise side of the business, so the biggest multi-brand brand marketeers. And then we have what we are calling the commercial side of the business, which is mid-market and SMB. But it's also enabled us to say that all key functions, especially real estate and the supply side of the business, are now centralized. So no more disbursement and no more distraction, the intensity of focus, either on the demand side or the supply side of the business.

Okay. And that's -- everything that you just listed is under the transformation part?

All under the transformation part.

And then the second chapter is expansion. What do you mean by expansion?

Two aspects. Yes, get more, more demand, higher pricing out of what we have today, which you would say more conventionally has been out-of-home brand exposure. But the second dimension is very much about the brand experience opportunity. More significant big brands, they have all the exposure they need, they need to be in real life, they need to be where the conversations are. So there are three significant areas we're looking at for next year. One is in all areas of experiential, brand experience. We had tremendous success at this Super Bowl with New Orleans, having our real estate or someone very specialized in our real estate, approach and work with the local authorities to get unique screening and canvas opportunities on the side of walls. But we can think about doing that, and we are now with FIFA, with World Cup, with Formula 1, how do we create the opportunities for a more experiential opportunity for big brands. The second is retail media. The retail media and the retail media networks are a huge part of the media ecosystem. They are essentially either all online or in-store. We have near store. They are near store with their in-store and that value proposition. The early conversations with some of the most significant retail media companies is that they're very excited about that and either they become a channel partner for us or we do JV. I mean, we've got to work that out. The third area is the creator economy. We live in an influencer economy. The creators have increasingly -- they have the scale and the influence. We have huge scale, we have a huge influence. We haven't been working with them, we haven't been productizing with them. We're having those conversations now because we're convinced that the opportunity to make that shift from out-of-home to IRL is about the conversation and the opportunity to build trusted brands in real life. And we believe that AI and the fundamental changes in the web search, Internet usage is going to be a fundamental opportunity for ourselves.

Okay. I want to start with a hypothesis, just to frame how I think outdoor has been used or viewed by big agencies. And then I want to confirm that with you, okay? And then I want to see, I want to probe on some of these changes, particularly the creator economy. I've always thought of -- if I was going to spend some money on advertising, I'd either go brand, and the canonical brand spend would be Super Bowl, or I'm going to go performance-based, maybe that's search or social media. And the reason outdoor CPMs have been low as you're sort of -- you're not perceived as either brand or performance-based, right? It's not brand because you put a billboard up and everyone drives buy, and the reach is sort of small, and you're going to get the same person over and over again. Do you think that's the proper framing in terms of the hurdles you have to overcome or the wrong framing for why outdoor has gotten low CPMs historically?

I think it's -- I don't think it's right or wrong. It's a framing. I don't believe it's the most accurate one for the significant absence of the enterprise marketeers because the reason why the out-of-home share of media spend has collapsed from 6% to 2.5% in 7 years is because the biggest marketeers in the world, let's say, the top 250 that dominate TV spending; they barely use the out-of-home media right? Why? Because they have all the exposure they need, they don't need more brand exposure. They want to be in a more contemporary dynamic way to build their brand, but they also want performance. We're clearly not a hard core performance play. There are too many options. And a lot of those big performance marketeers don't care about brand. We want to work with the brand marketeers who do care about brand, but they also want performance, which is why the digital side of the equation is so important. This way, out-of-home and digital out-of-home in combination is a wonderfully powerful thing. The reason why I don't agree with your summation of you're neither a brand builder, Apple is our biggest marketeer, they are the most sophisticated marketeer in the world and the most powerful brand. They use the imagery and the simplicity. They don't change their copy all the time. And any of you who have been into an Apple store, you go down, the visual impact of the way they use the medium is the way they cherrypick the very best of our medium not just with myself, but also with our competitors, and they love the medium. Now isn't that I run it? Why do Apple love it. And yet, look at the rest of the tech category, where are you? Where you -- that's another reason why we've established our 6 industry verticals and created the Brand Solutions Group. The Brand Solutions Group is exactly that. They are not selling products and audiences, they're selling solutions with outcomes. And that's run by Brad Alperin, who joined from Dentsu. I mean it's another point here that's very important. I'm not having any more out-of-home people. We are hiring industry people who can put the power of our great medium in context because for all these big marketeers over the last 20 years, especially last 10; the strength of the technology giants have been so sophisticated, they're compelling, they're powerful. Out-of-home has been forgotten, not in the conversation. We have to reestablish, we have to reassert, we have to create a more contemporary, relevant positioning of this great medium, and it's coming our way. A lot of people are asking me in the one-on-ones we're having about mega trends, the economy, tariffs. The biggest mega trend is our biggest opportunity, which is AI creating Web4. And Web4 versus Web3 is going to be a very different situation. Already, we're seeing trust levels on the Internet and web usage starting to come down, and we are going to demonstrate our medium is the most trusted medium. And if you trust the medium, you're more likely to trust a message,

Trust the medium because it can't be all...

Because It's real. It's real. That bus is real, that billboard is real, that transit experience when I'm sitting there on the MTA, it's real, it real and in real life. And that was our pitch for a lot of the virtual. We're having conversations with a lot of the big AI companies, don't just build your brand in the virtual world, join the real world. This is our opportunity. We have to change the vernacular, we have to change the value proposition, and we have to support it. And now at the same time, let me reassure everyone, we are not, not committed to the mid-market and the SMB. This is a bedrock of our business. It is 60% of our revenue. And what we've done is make sure we separated the 2 sales organizations that everything underpinning it, research, creative, ad ops, RevOps; runs a cost on a horizontal. And those 2 CROs, Jim Norton, who is experienced at negotiating and navigating and catching big fish, he joins us from Google, AOL. He's a very significant player; Mark Bonanni was promoted to run the commercial side of the business, he is deep into the operational weeds of working with smaller- to regional-sized clients. And we -- and it's got to be an exciting partnership.

Okay. I want to circle back on those three things that you talked about where you're focused, you cited Super Bowl, FIFA World Cup, retail media and creator economy. Can I circle back on those real quick? So I never remember a time, and maybe I was just asleep at the switch, where the outdoor companies called out a sporting event like Super Bowl until last year. That felt new to me. And so I don't know if I'm just misremembering or if something has happened, where these big sporting events are actually able to move the needle in a meaningful way. And if it is new, it feels like, given the World Cup is in the U.S.; that this could be needle moving for your industry...

And the Olympics in L.A. Well, I think it's interesting. You haven't noticed the out-of-home medium that's capitalizing on it. But the money those big marketeers and those big sponsors are spending have -- it's massive. And once they've spent that money, they need to activate. So we are ring-fenced. We can't be chasing non-sponsors. I mean the city of L.A., I mean they're very sophisticated the way to manage that. But the opportunity to have conversations with the cities, in fact, who do we just partner with, Stephan? San Francisco Sports Authority. Again, we need to get ahead of this in advance and lay pipe. Is it Formula One? Is it NASCAR? Is it FIFA? Is it World Cup? Is it the Olympics? The issue is how do we create more brand experience, what opportunities do we have to engage in an experiential conversation. Bank of America will need more brand awareness. It doesn't need more brand exposure. So we need to be in both businesses and demonstrate that we can do it differently. And our medium can do that. I mean if we think about transit, a lot of people have approached transit. When I arrived at this company, transit didn't have what I would note is to be the superpower opportunity that I believe it has because we can do the most creative things, the most incredible takeovers in New York City, in the MTA, the very fabric of the most dynamic city in the world, and we're able to do incredibly creative things. So now talking with the MTA, we can now do that with alcohol as a category. So now you can start to imagine, you're selling a different product, not waiting for the phone to ring for someone to say, "Can I buy an ad campaign?" I'm not in the business of selling ad campaigns. We'll take those calls, but we need to be on the front foot much more creatively and much more strategically representing our assets.

That's interesting. Retail media was the second once you talked about. I think in the Wall Street parlance, when they think of retail media, they just think of ad dollars going from shelf space, into [ iCap ] displays and just going to walmart.com or amazon.com. The way I thought you described it was sort of -- I mean, is that the way you're defining retail media? But you said there was something interesting. They said, there's on store, in store. And you said, but you're near store. Okay. I like that framing. But I mean what is packaged goods as a percent of your business now, if you had to guess? Almost zero, right? Okay. So that's sort of interesting. Now do you have to get some data that you don't have sort of -- okay.

But in conjunction, we're having the conversations. I can't name the different players we're talking to. We're talking to three significantly because we have the opportunity to help them. All the retail media, no once has taken more money more quickly out of the media ecosystem than retail media over the last 5 years. It's now 24% of all paid media spend. Well, a lot of them, starting with Amazon and then Walmart and cascading all the way down; it wasn't just in store and [ endils ] and caps. I mean a lot of that was the old shopper marketing. Now this is online networks and their ability to basically white label the Trade Desk and say, "You are going to advertise on our network or you're not going to get stock." That's running out of road. They now want the credit cards, they want the banks, they want the airlines, they want non-endemic brands to engage with them. And all I'm saying is going to them thinking like an agency leader, not an out-of-home billboard seller, which is, okay, why wouldn't you go to L'Oreal for their next shampoo launch and do an exclusive if you Duane Reade or CVS or Albertsons, and your proposition is not just what happens in store, but the near store because we'll aggregate all our inventory. We'll map it, we'll link it, we'll have ID -- mobile ID. We can see traffic patterns, we can adapt our content and our creativity. Your value proposition is going to be much more compelling to L'Oreal or Unilever than had you done it just on your own. Now I'm -- just to be clear, this is expansion, growth development for 2026. Among these are proprietary conversations that the lean-in we're having is significant.

Okay. Creator economy. Yes. Well, I'm 100% onboard with you, and I'll tell you my sort of stupid lens that I look through everything. I'm watching YouTube now beat Netflix in terms of U.S. viewership. I'm watching Substack grow subs more than the New York Times and the Wall Street Journal. I'm watching Roblox grow faster than Take-Two or EA. So every rock I turn over, it's creator economy, right? So I'm with you. I'm not smart enough to understand, like I wouldn't have even thought about, what is outdoor -- what is an outdoor company like OUTFRONT going to do in the creator economy? Just put some meat on the bone. Like I'm with you on that is the direction of travel. But paint the picture...

I'll paint the picture with Apple, who won the -- they were the marketeer of the year second time in 15 years at the Cannes Lions advertising festival, where they won the Grand Prix was for the activation. Did any want to see at Grand Central for severance? They did a week. They had the entire cost of severance. They didn't own a billboard, they didn't -- they rented a space, but they amplified it, it just caught fire. It was amazing. It was an experiential event, and it was combined. We have done massive takeovers of -- we went down underground. I'm walking around the empty -- I'm walking around the subway system, I'm walking around Grand Central. And I'm looking at the Stranger Things activation. And I'm asking my team, did you recruit all the top creators who love Stranger Things? Did they all come here with the amplification with the massive audiences and the top influencers? They look at me blankly. Why not? We need to track down every one of these brands, if you say we're now operating in the creative economy. And these creators and these influencers have more influence than the corporations themselves. And by the way, they're increasingly not interested in just sponsoring corporate brands. Mr. Beast's chocolate brand has taken 6% market share of Hershey's. Whatever was Logan Paul's -- I mean, his energy drink is collapsed now, but it really hurt Gatorade for a while. So you've got this situation where they have huge online influence. We have huge IOL influence. If we partner together -- and by the way, this isn't my idea. I was just shared that there's a business called [ Lazycain ], who's taking significant share out of Kentucky Fried Chicken. Their entire model is out-of-home and influencers. That's exactly what they do. And they run out-of-home campaign, and they make sure all the influencers are there, and they activate it, and they light it up. How do we productize it? How do we think about that? So now we've met a number of the significant influencer companies as well as a number of individual influencers, who have massive audience. They have what we have. We have huge scale and significant influence. They have huge scale and reach, and they have huge influence. Why don't we package that together?

Okay. So all of these initiatives that you described, it's very interesting, feel like this is most applicable to pretty urban environments. Is that fair?

Directionally, yes. And we're a premium brand in the most premium cities in America, right? So we are -- we have focused on New York, Miami, Chicago, San Francisco. So you focus on those significant cities. It's not exclusively that way, but the density, especially when we have a lot of commitment to transit, we believe there's a lot of opportunity to apply this. But I wouldn't say it's exclusive.

Understood. It just tilts that way.

It tilts that way. And by the way, I just want to clarify once thing. I think it's important to stress that this is as well as not instead of our focus on looking to generate campaign brand-building activities across the core base of advertisers. There are still a lot of new advertisers. When I look here and I see Citi and I look at now the activation and any one of you living in New York, you see how much money Citi are spending on credit card on -- and now we've got AMEX -- JPMorgan. JPMorgan Chase, and we've got others, we've got GLP battles now breaking out; we've got so many categories that we have the opportunity to talk about advertising impact. That doesn't go away.

Understood. So I'm going to give you my humble framing of the sources of growth in the outdoor industry, not for your company. I look back over 10 years, it's about mid-single-digit growth on average. 1/3 comes from tuck-in M&A, 1/3 comes from converting a static board to digital, and 1/3 is the rest of it, which is same-store static price increases, whatever. So 1/3, 1/3, 1/3 roughly. It may be different for your company, but that's sort of my framing. To me, what that tells me is, in order for a -- if your initiatives fail, right, and if the future looks like the past, right, you need to do more M&A, right, to keep top line growth in the mid-single digit, and you need to keep converting static boards to digital. My question is, do you think that the cadence of M&A that your firm does will look like that, i.e., small tuck-ins make up 1/3 of your growth and digital conversions make up a 1/3 of your growth? Or do you think these initiatives that you rattled off will either make your growth faster or the composition of your growth look different than the past?

We've talked about this a lot as a team, and we agree that for 2025, this was going to be the year of transformational focus on the existing core business and the M&A was not going to distract any of us. So if you go to 2026, I think that general direction, certainly from an industry point of view is fair, I think, is accurate. I do believe, however, we have the opportunity to focus on increasing digital conversions and increasing demand and being much more focused on how we, both programmatically as well as directly, develop the most professional sales capabilities in the digital arena, which will pull more demand, which will give us more opportunity to accelerate. The M&A side of it, we are always open and interested, especially tuck-in opportunities. But it's fair to say we are not having any ambitions on any big M&A.

So then if your initiatives are successful, then we're going to see you talk about better yields that's going to be the sort of the North Star over the next couple of years?

If you look at our CPMs relative to other media CPMs...

Lot of headroom. Right. Okay. So yield is the North Star?

The yield and the other dynamic of that is our focus on profitability. You have seen us exit from 2 significant leases this year that were basically breakeven at best. We're not doing that anymore. We're going to be very focused, especially now we've consolidated and centralized all things real estate to ensure that those landlords we're working with are very excited that they're working with the smartest sales partners that they can. And we really improve our profitability by making sure every lease is great.

Okay Remind me, you exited the aboveground MTA. And then what was the other one?

A significant player in L.A.

So can I ask a few transit questions?

Sure. Love transit.

Okay. For investors -- investors hate transit. They hate transit. They hated it in the London underground many years ago.

Do they hate it or do they hated the contract?

They hated the contract. Yes. exactly. But it just feels like heads, I win; tails, you lose sort of setup, where if everything goes swimmingly well, it's a generous rev share. And if things go upside down, you're stuck with the [ MAG ], right? And so I feel like for a company like yours, yes, it's urban, it's dynamic, as you talked about, being right there in the MTA. But I think it hurts your multiple because people are like, "Oh, I don't know when this thing is going to go upside down again when we go another recession." So I'd love to just get your take on how does transit, as the new CEO, fit into your sort of thinking? Is it integral? Is it...

Well, it fits because it's in the family, and I've inherited it, and it's part of my plan. So what I'm going to do is not look at it through the lens of weakness and frustration. I'm going to look at it through the lens of opportunity and success. And to do that, first and foremost, I've had to change the team. The entire team from marketing, product marketing, research and sales is entirely new. And they are now focused -- and that was clear to me early on when I had a number of conversations because if people's mindsets and their mentality is already, "This is a problem child and no one wants it," then they're not going to be very [indiscernible] and sell it. So now we have a very significant -- and that transit task force reports to me, and they meet with me on a biweekly basis. We have a growth philosophy team meeting every Monday, we have a biweekly transfer. And that transit task force is about building on those great case studies, specifically to the point. And it isn't just the MTA, it's not just in New York, it's in [ Bart ], it's in Washington. It's in a more limited way, in Miami. Obviously, we have the biggest opportunity in New York, but it is the opportunity to create the brand experiences that are truly going to engage, create conversation and be in culture. You have to sell it that way, you have to market it that way, you have to demonstrate results and research that way. It's a different mindset to saying, "I've got some static boards that move at speed." Also lighten it up programmatically, now increasingly see the money that we're spending on the CMS and the ad tech stack to support it. So is that going to convert and you're going to see the revenue? No. But it is -- you'll see it on our numbers, you'll see it on our results, you'll see that [ before ] it starting to open. It has been relatively closed because it has not been sold with the vision, the energy, the enthusiasm and the belief necessary. So we are doing that. And the other part of this is the success you have with some -- it's about the conversation. We've just taken a new campaign for Weight Watchers, which has just come out of bankruptcy. It's on transit. It's not on billboards, it's in the transit system. So we have to be much more proactive, and we are being much more proactive because when we flip the economics of these transit contracts, they will start to contribute in a much more meaningful way.

Okay. So I'm just going to summarize. So this -- I'm going to just give you my like on-the-fly distillation of what you've just said. It sounds like you think the biggest challenge for OUTFRONT has been the positioning of the outdoor medium in the minds of the decision makers, and you think that there's a lot of incremental opportunities to sell what you have more effectively to the right customer in a more creative way. Is that fair?

Yes, and you play with a hand you've been dealt, but you need to keep playing it and strengthen it every turn. So the contract has certain dynamics in it that we all know so well that I cannot change. What I can change is the revenue levels, what I can change is the context that everyone can't see looking at me and saying, "This is what happened pre-COVID. It's all about the ridership" and give me well explained excuses as to why we're not turning the corner.

Okay. Okay. Very good. Are there any questions? If there are any questions, happy to take them. Nick?

Okay. I'm going to ask once last question. So let's say you come back here a year from now, and I ask you about the last 12 months, and it's a good news story; what do you think you'll be telling me? Should it be all about top line growth? Should it be about CPMs, yield, margins? Like where -- what's the North Star you want investors to focus on if your initiatives begin to bear fruit over the next 12 months?

I will sit here and proudly talk to you about the success of three things that matter most to me: the demand levels, the organic growth, organic, not -- let's talk about truly driving the organic growth levels to a more respectable growth that were born of growth at the enterprise client level and a more consistent success of driving new business growth through new logos and not just current clients. Second is going to be on the supply side that we're going to have a tighter grip on all things of our supply, and you're going to be talking to me about. It isn't just about 100 to 150 board conversions, maybe it's higher than that, but more importantly, the quality of our inventory, the quality of our supply. And third is going to be the culture that this is a culture that is really talent intensive, continues to attract highly talented people, that is a winning culture that is a dynamic culture and is a creative culture and is changing our home in the minds of the biggest marketeers from being something that wasn't very relevant to now being about building their trusted brands in real life.

Perfect. Well, I look forward to a year from now.

Thank you, Nick.

Thank you.