OUTFRONT Media Inc. ($OUT)

Okay. Great. We'll get started. We have from OUTFRONT Media. Nick Bryan, CEO; Matt Siegel, CFO. Guys, thanks so much for being here.

Thank you for having us.

So Nick, you're coming up on a year since you laid out your strategic imperatives. I think that was last May. The results have clearly inflected. Can you give us a sense of where the company is today versus then what you're most proud of over the past 12 months?

Well, the company is reflected by the results is really operating very well. If I start at the -- I separate in a way, the branded business -- there's a greater clarity on exactly what business we're in and the opportunity we have to really be a strategic business partner with some of the most significant advertisers at the highest level as well as being at the mid-market and the low -- the SMB level. So the focus on what and how we're positioning our brand is resonating very well. And at the business level, if a core part of the business is people, process and technology, a lot of the heavy lifting we did last year on the restructuring, the redesign of the business the talent we hired at the leadership level, the business processes that we've been focusing on and as importantly, a lot of the technology investments that we've been making. So we're early in the journey but the results are promising.

So the broader ad market have seen some pockets of macro uncertainty yet outdoor seems to be holding up well. If we look at the results of you and your peers. Maybe you can walk through why you think out-of-home has been resilient in this environment? Is there something structural about the medium that is providing a degree of insulation?

Yes, absolutely. We're the recognition, I think, 3 things have happened. One, there's been a pendulum shift and it's a slow one, but it's really starting to happen from a lot of more significant brand advertisers who have who are, for the last 10 years has been too far down the bottom of the funnel and short-term performance and expensive longer-term brand building. There's the other part of the marketplace that is recognizing that for all the power of the addressability and the personalization of digital media, there's a real strength in the 1 to many that out-of-home has that we have. And certainly, we're really leveraging and I think the industry is really picking this up that we're trying to reframe out-of-home media and talk about increasing the IOL because out-of-home is a fact, IRL is a benefit -- and we don't want to just be talking about a fact, it's out of home. So what the TV is in home. We're talking about in real life and in real life brand experiences as part of the value proposition, why brands need to be integrating this gray media as part of their omnichannel mix. So it's starting to resonate. Now we need to do a more consistent role collectively, and I talk to my peers about this. At the marketing level, but we need to underpin it with measurement.

Maybe turning to OUTFRONT specifically. So Q1 outperformed and you've got it for further acceleration in Q2. Why don't we start with billboard. Maybe you can unpack what's driving the better trend? Any color you can give around category, region?

Yes. I think if I think about the regions, the West has done, I think, exceptional was on the last one. I think certainly the benefit that we've had in L.A. and in San Francisco, and that's also been benefited from a tech trans. I mean technology now, including AI, is representing 1 of the largest categories and the AI spending of AI native businesses as well as the more significant established players is definitely leaving San Francisco, it's very extensive in New York now. So that's been a strong 1 for us. Finance, CPG, a number of those are the exciting categories that we're seeing.

Is there any way to frame the competitive dynamic on that AI side, right? I was in San Francisco in March, accounted from SFO to the city, probably 2/3 of the Boards had an AI message just how kind of unique is this moment in terms of that incremental buying coming in?

Well, I think it's probably even higher than that. I mean it's remarkable the level of ambition that the AI companies are all -- from all sorts from the B2B to B2C and then what it is spent. So we're pretty much sold out to the end of the year. And they, again, start in San Francisco and then want to come to other markets, we got some have migrated to Chicago, some to Boston, most to New York but we're very excited about it. I mean it's clearly here to stay. Also, the other opportunity in the other super power opportunity that's emerging now, which is probably not what people would have considered with AI is what it will do in changing agent commerce and the genetic advertising and marketing. So now you've got a situation where in the open web as well as the walled gardens. So you're going to look at so much in the digital ecosystem that AI is rendering fake untrustworthy, unreliable unknown more and more bots clicking, more fake bots, more fake impressions, more confusion, a growing world where a lot of the biggest advertisers have a lot of frustration with a lack of transparency and fraudulence that goes on in the digital ecosystem. So in antithesis of that, we are the only medium that is IOL that we are the only 1 to many true physical medium that has a high degree of trust. So we are leaning into that, and I think that is only going to continue at a very accelerated pace.

I just want to understand your last point on Agentic. So if we move to this world where sort of consumer purchasing decisions, not everyone, but a sizable portion go to my agent talks to a publisher agent or a seller agent, right? This will translate in a way to more IRL, more outdoor.

Well, it will because we'll be the only medium if you're in a low interest priority brand sector of a preference, and you're not -- there's a high degree, you're going to keep the preferences that you're very interested in whether it be Italian travel fine wine and fast cars. You don't want to hear from as many brands and businesses in that sector. The things that you can delegate that don't interest you will be pushed to your agent and agents will talk to agents and humans will talk to humans. There will be as many agents as there are humans. Every one of us will have our own custom smart, well-trained agent to do the work. We will be a medium that cannot be separated. It cannot be filtered. So even if you are in a low priority category, and there's many you can imagine that you're not going to be personally interested in, you still have an opportunity to engage with basically, everybody using our media. What our media needs to do is get much smarter and almost not leapfrog basic audience measurement because we haven't even got that fixed yet. We've got to get that fixed but we've got to move into the behavioral intent side because what these agentic planning and buying systems are doing, they're not looking to just buy audiences anymore. They're looking to buy audiences people with a buying intent that they may be ready to book a holiday buy a car. And so how do we make our media, not just in real life and a physical media and a public media and a shared media experience, how do we also bring the intelligence of smart data signals.

The transit business led in Q1, the MTA or with the MTA up 26%. And Investors often ask what's changed at the New York MTA from what we can tell, inventory ridership trends are stable. So maybe you can comment on OUTFRONT specific factors like your sales team, experiential offering. Maybe you could just talk about investor appreciation for the transit channel just in general at the...

Well, we -- well, thank you for that. I mean we're very we're very bullish about transit and not just the new MTA with -- when I write, there was a sense of confusion between the nature of the contract and the nature of the medium. This is a line of business and a particular product that has so much of the cultural zig guys, server 6 million people travel using the tubes, the buses and the trains in New York City every day. So understanding how we could be more deliberate and more focus. So I changed -- yes, we changed the sales team, found some million leaders underneath what was the leadership team. we promoted them. We changed the compensation structures and we gave it a product marketing focus that started to arm those salespeople with very relevant specific orientation towards transit and specifically New York in general. So suddenly the flywheel has been turning. And we've also made it very much -- it's not just -- I'd also see it in L.A. We've seen it in San Francisco, but the new MTA specifically has attracted a lot of a really big assortment of brands who actually want to do more creative things. So remarkable how much we can do in the MTA. So that is becoming a platform for IOL media like nothing else.

I feel like I have to press on that last point, right, about more you could do creatively because we've seen that hold wrapping the subway. It seems like there's just a lot more opportunity.

We did an air center drop for [indiscernible] works. We did we -- while expert people could get in on the choose and everything was structured in a different way around the ticket was a [indiscernible]. There's so many coming, ESPN. They wanted to ramp. They have their mass cots -- the MTR are a great business partner, and they appreciate that by being more creative by allowing more opportunity for creativity and activation those experiences get photograph and they get shared. That's where the amplification of our medium has such super power capabilities because if you do it right, people are excited by it. They're stimulated about it, and they want to share it.

Got it. And then separate from the MTA, you noted a couple, but there's implied momentum in your other transit markets. Any kind of regions you'd want to highlight out of the portfolio?

San Francisco specifically is done is really -- they have had the sort of in level coming back and it's Matt always says in LA, buses, it doesn't mean manner how many people are in the buses because it's what's going around. We advertise on the outside. So -- but they're both doing well. In general, the transits, the sentiment towards transit as a super power line of business in our portfolio is there now before it didn't have the attention. It didn't have the enthusiasm, and it didn't have the marketing to support the salespeople to be able to really showcase the excellence that they provide.

Matt, a major milestone for this year. You now expect MTA revenue to surpass the MAG level in '26. Can you just walk through the accounting dynamics here? How does the shift to revenue share technically work in Q4.

Sure. So a major milestone. It's the first time really since 2019, we're going to be above the MAG level and have some recoupment. So it's great to tell people, great to hear, and we're excited about it, and hopefully, it continues in the future. We started the year straightening our MAG as we did not expect to be above the MEG level, and that was the preferred accounting. At the end of the first quarter, we looked at our forecast and said we're going to be above the minimum guarantee, so we've shifted into revenue share. The MTA is a 55% revenue share up until the MAG were Meg the minimum. And then the revenue above that gets accounted for a 70% revenue share. And I say accounted for, it's noncash. The delta between that mag line and the 70% line we retain for recruitment against the hundreds of millions of dollars of money we spent on the deployment. So for us, we'll get the first quarter had too large an expense because it's a seasonally smaller quarter in the straight line over expensed that quarter by the third and -- second and third quarter will be caught up a true-up -- the fourth quarter will be a pure revenue share quarter expense is 70%. So the expense will be much higher than it was last year. The EBITDA is like could it be lower, but the cash flow being very strong.

Right. So to confirm no impact to cash flow, no impact to AFFO.

There will be an impact to AFFO because it's part of EBITDA, but the cash flow and working capital will benefit.

Got it. So the World Cup is coming up next month. You disclosed about 70 active customers. I think over 40% of FIFA sponsors engaged with agreements across 6 host cities. Nick, can you just give us a sense of kind of what you're doing specifically around the World Cup? Is it primarily leveraging your existing billboards? Or is it more about like those areas like close to the arenas and stadiums.

Yes, there's a couple of things. I mean, certainly, we've had a high level of expectation that the Peposponsors as well as the team sponsors are going to want to be activating. And the inventory, we separated it and we made sure that we were very careful to ensure that in those particular markets, that inventory was locked and set aside. And we've had very specific marketing, very specific outreach, very scant packaging and pricing. -- for those advertisers. The second thing we've been doing is our real estate and our supply team who have got great relationships with, obviously, all local municipalities and the planning different is to say how can we create unique inventory, what special capabilities are we going to be able to have for this next 3- or 4-week period to really use these walls and start to get smarter about the way that we're integrating, let's call it, custom inventory with what our standard fare is. We've even got some conversations going on now. We've got a couple of fee sponsors who have bought drone shows from us in conjunction. So there's the whole notion that there's an IOL media activation opportunity here. And that's our challenge and the biggest opportunity we're excited about where we're doing on our targets. We set aggressive targets. We set a dedicated team to lead it. is to have the highest level of retention of those brands who have come into the medium because of FIFA stay with the medium because they can see that we're proving that it works, and then we can maintain those diet dialogues going forward.

I guess to that last point, it sounds like you do affect -- do expect some sort of long-term impact, meaning everyone has been so focused on World Cup this year, but this is obviously an opportunity to bring new marketers and to realize the long-term.

That's -- that's our industry's greatest opportunity. I was just having this conversation in Dallas last week at the AAA, the industry's trade association. So between myself, Sean and obviously the new owners of Clear Channel we're all going to really significantly as well as a lot of the independent players benefit from this influx of these are potentially non out-of-home advertisers or they're small out-of-home advertisers who are going to be stepping up -- so our opportunity is to engage them, discuss how well it's worked and make sure that we get into the proper measurement and attribution conversations.

So programmatic and digital direct automated sales grew nearly 40% in Q1. I think that now represent 20% of your digital revenue -- can you talk about how the buyer base here has evolved? Are you seeing new types of clients come in through programmatic who wouldn't have bought outdoor previously -- or is this primarily existing advertisers shifting how they transact with you?

It is primarily new buyers and especially in the programmatic side of it. there is a whole world of inventory management and media spending that goes with audiences, specifically not linked to individual media. So the more we can have are our data and our inventory into those centralized, whether it be the DSPs or the SSPs or anywhere within the program and ecosystem, we benefit. We will -- we do have some individual advertisers who are previously using direct I/O, they want to move to programmatic, but we're excited about it. I said that on the call. We made the investment to hire a new Head of Digital Sales and Strategy, Jeff from the Trade Desk, a heavy weight leader, who not only make sure on plumbing data sets we -- our ad tech systems were frictionless but had the relationships with Amazon, with DV360 Google with the Trade Desk to ensure that we could get our inventory fully integrated into -- that is going to be 1 of the biggest unlocks -- and we know 80% of all digital media -- if all media spend is 75% is digital, 80% is traded programmatically. So the more we can accelerate digital, the more we can accelerate programmatic, the more we engage in an entirely new revenue source.

So just staying on some of these points. The ad quick partnership is a few months in now. Can you give us an early read on how it's being received by your commercial clients? What are you seeing in terms of simplifying the buying process for the SMBs?

Well, 2 parts to that question. The first part, certainly, very enthusiastic. Has it been responded? Has it been felt in the marketplace by our clients, less so because this is more internal at the moment about the way we're taking the pain and the flexibility out of the way we're organizing our inventory for it to be structured and therefore planned, therefore, bought. So a lot of that is in the early stages as well as data and measurement side of it. So we're very excited about the way that's going. The longer-term aim is yes, just like the other tech giants who dominate the advertising ecosystem SMB is not a manual affair. You're on a self-serve platform. So we have already looked at the way we categorize our clients between SMB 1, 2 and 3, mid-market we want to move the lowest level of our SMB onto a self-serve platform. There's no reason for us to have to have an AE directly interact with a gem owner in Boston, who is interested in that Board streets away who wants it. No, that can all be and all should be on SMB. So that's going to be -- there's certainly going to be -- we're hoping for next year, but that's next in the road map with ADQ.

Okay. And then I wanted to ask on the AWS partnership. I think this is designed to connect your inventory and data directly into the major agency groups planning and buying systems. I think you've mentioned 1 signed up another potentially on the way. Just maybe you could speak to the efforts there, how quickly you think this can go?

I can't name names yet because we've got a couple we're going to be announcing hopefully 1 in canvo soon. But this is not just about having our inventory in -- through another source of planning buying decision-making. This is also recognizing that the nature of the genic advertising and marketing ecosystem changes fundamentally because the agent -- the agents are basically going to be making their decision making on behavioral signals. They're not interested in buying audiences. They're looking to find where are those people who are most likely to buy the fee for ticket or to be prepared to go into the car dealer -- so the level of data sophistication from these agency holdcos evidenced, by the way, this week with Publicis buying LiveRamp. And that's another example there for low to me, they've had Epsilon. Yet again, it's another highly sophisticated data capability that they're integrating into their planning and buying system. By the way, they're going to be looking to leverage that for their principal based buying which means they're coming to media owners to basically take on our business and arbitrage it to the clients with a higher level of intelligence. So we need to be in those stacks -- we need -- we're talking to all the holding companies and all the big buying groups to make sure that not only our inventory, but our data signals are fully integrated and the partnership with AWS enables us to kind of have these conversations.

I remember -- Nick, I remember a year ago, you're talking a lot about the holding companies and the need to kind of connect with them, get more buy-in from them outside of what we've talked about today, the AWS partnership. Anything else, I don't want you to front run maybe what you'll be saying at Con, anything you else you would say in terms of building more traction with the holdcos, which I know it's been a big initiative.

It has been. It's been -- but but with the holdcos, elevating the nature of our discourse and our representation beyond the At-home specialists, into their central planning themes, the ones who are looking after the planning for Mars or the planning for Microsoft or the planning for General Motors, who is looking at the omnichannel planning and then the central trading desks. And these central trade sense we've got dedicated by separating the sales organizations we did last year between commercial and enterprise that -- because I really don't like the definition of national and local. I think it keeps a lead on everything to really unlock the growth in the enterprise side means that we have to have stronger relationships with the -- with holdco agencies. It just does. But it also means having a greater discourse with the clients themselves, the ultimate buyers to really miss is more of a marketing point of view rather than a negotiating point of view. With the agencies, we're going to be negotiating with the clients we need to be selling. And this is when I talk about IOL media. Why is that something that a client should be thinking about as part of their campaign planning.

So the OAAA recently announced a new measurement pilot program. I think you spoke about investing your own dollars, improving the efficacy of the medium. Can you just walk through where the industry measurement landscape stands right now how are the proprietary tools you're building fitting into that story?

Well, our priority is the industry measurement standard. It's not about what I have individually. I'll augment that Same thing with Clear Channel, Lamar. No one. No one individually is going to resolve the inherent weakness of this medium's lack of growth because it has not credible industry measurement. Audience measurement that is both robust, consistent and credible for the buyers. It hasn't had it and hasn't had it for decades. So I'm really excited now that after we went through this whole process to upgrade this and finally fix it, we ran the pilot program, and this is before I -- so this was obviously Scott and Shawn and driving hard with the OGA. Ipsos won that pilot. They won the RFP. Ipsos look after out-of-home advertising in 26 markets around the world. They are a big brand. Clients want big brand security, Nielsen, Kantar Ipsos. So I'm very excited about this. I want it to go faster. I believe that we need to get this all ramped up and capable to really capture the September planning -- September, October planning cycle for next year. But it's promising, it's very, very promising. On top of that, each individual player can decide what level of data capture, data signal integration, we can overlay. But if you haven't even got credible and universal audience measurement, you've got a real problem.

Got it. Matt, you've guided to, I think, 125 digital conversions this year, up from about 100 last year. I know in the past, you've talked through a 4x revenue uplift, 2x cost uplift. I think that's still holding a question we often get, just given those returns, what's the constraint to go kind of meaningful faster?

So we're still getting those same kind of returns, ForEx revenue, 2x cost, we began that for a number of years. Obviously, it started much higher and now we're in the really good area of conversions. The biggest constraint is really regulatory and kind of the gestation period of how long it takes to get approval, whether it's a local community board or engineering review or some other thing in between landlord who's it slower. We probably have about 300 projects in our pipeline that take multiple years and somewhere between 100 and 150 come out of the pipeline in a year. We'd like to speed it up a little bit, maybe get some more boots on the ground. But we think we're doing the right number if we can bump it up a little bit, we'll do more. But earth. So right now, we think it's appropriate.

Okay. We touched on some factors impacting the transit margins earlier, but billboard EBITDA margin has been expanding. I think you flagged continued improvement in '26, maybe just help investors understand how much further you can improve profitability in that segment? What are sort of the levers going forward?

We think especially on the billboard, has a lot of fixed cost in the business and lease cost and some overhead. So over time, as revenue grows, we think the margins can continue to grind higher, not necessarily linear in the quarterly sequential is there's a lot of things that go into it, whether it's media mix between markets, mix within markets. But over time, we think it goes a little higher. This year, we're spending a little more on SG&A, which you're seeing a little bit higher especially in the billboard side, as we've said on our earnings call, we're investing in our business in some of the sales tech. We signed up Salesforce we just discussed, we brought an ad Quick, which has an operating agreement. But I think over time, you'll see those investments pay off in improved margin and improved revenue growth in 2027 and beyond.

And then related to corporate earnings, you had discussed bringing back some of the consultants you'd work with prior. Maybe just discuss what the focus would be there and then how investors should think about the fee structure associated with that.

We've brought them back and this is a third go around, it's easy to bring someone back where he knows the business and knows the people. So the the tuition is very low, 0, a little bit of help with revenue, but mostly on process improvement. They're looking at how we call shipping, how our cross market salesperson in New York sell something in Chicago, how that works and can it go faster, simpler. They're looking and our marketing structure works, how our RFP response goes really, can we do things faster, which will be better for the client require fewer account exec and sales support time so they can do other things and focus on more clients as opposed to more time in the same client. So we're measuring them on savings ideas, KPIs for these special projects, revenue growth and then a fixed component.

Okay. I have a few more, but just up all the room. If anyone has a question, you can raise your hand. If not, I can continue. Okay. Nick, maybe just a few more on some verticals. So pharma and health care, I think you've talked about that as a growth opportunity. Just where are you in terms of building out that practice? Are you seeing some of the same headwind -- sorry, same tailwinds associated with some changes at the...

I know that the [indiscernible] Shawn and also Clear Channel, we're talking about that as a particular category that's really demonstrated some real momentum here, and we're seeing that as well. We are cultivating that, whether it be in terms of Rx, whether it be on farm, what it could be on the GLPs, we've done very well there. Also working with dedicated data and measurement companies who specialize in pharma to make sure that they're part of that organization. So it's 1 of the industry categories. We've got 5 industry verticals that we're really focusing on. But we do believe in line with my peers in the industry that this is a sector -- I mean, it spends less than 0.5% of its total spend, and it's 1 of the biggest spending categories in the out-of-home medium. So as far as I'm concerned, it's a huge opportunity. And now we're starting to see Pfizer J&J. We've seen a number of the big brands, both on billboard and in transit. So we're excited about that. you mentioned 5 verticals you're focused on, should give you an opportunity to just highlight anything else? Well, the CPGs and other sectors, CPG and retail. We're getting real traction in some of the significant conversations that are going on there. Financial Services, I think, is more dependent on the individual players who are spending at the time, but we're seeing again, at the regional level, a lot of deregulation. So therefore, there's more consolidation in the banking and the finance and the credit area. So we're excited about that. Automotive I've been personally involved in a couple of the big conversations there. That is, again, a massive category that Bally uses our medium. So again, a lot more activity there. And then when you think about the entertainment sector, we're pleased to see now this year some real momentum happening because obviously after the righter strike and then the production, everything was delayed and slowed down. So we're now actually seeing quite a good amount of money that's now coming in not just from the studios, but also from the streamers.

Got it. Okay. Wrapping it up, Nick, you've articulated a vision in the past, kind of getting out of home from where it is now, around 2.5% of U.S. ad spend back to where historically, it's been around 5% and repositioning the medium in an AI-driven world. I guess, what are the kind of proof points over the next 12 to 18 months that would tell you this thesis is playing out.

Number 1 would be that some of those most significant brand advertisers who joined us for FIFA. We really got to taste through it and started to appreciate and wanted to investigate how our medium, not as outdoor at out-of-home, but as IRL media and experiences that they can create should be part of their campaign brand building. The fact that we've got, and we're tracking industry penetration so we can actually track through Vivi exactly how much is spent on our medium collectively versus other media. And thirdly, that we are getting the traction coming from our position in the marketplace the advertising to real people to humans who have high level of trust in our media is something that is now playing out for the brown marketers who want to build brand in a very fast-moving agenetic advertising and marketing world. We have a unique opportunity to really represent the fact that we are a one-of-a-kind superpower ingredient media as part of campaign brand building, and they need to be trying it. So for me, it's about the new non-out-of-home advertisers who are trying our medium, not massive campaigns yet, but those who are saying, yes, I'm going to test you in individual cities or states -- so those are going to be the metrics we're looking for because the absolute share of our medium it's not where it needs to be. It doesn't need to be this slow.

Got it. All right. That's a great note to end on. Nick, Matt, thank you for being here.

Thank you very much.

Thank you.

Thank you, everybody, for listening. Thank you.