Thank you for standing by and OUTFRONT Third Quarter 2023 Earnings Conference Call. My name is Sam and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. I'd now like to turn the call over to Stephan Bisson with OUTFRONT. Stephan, please go ahead.

Thank you, Sam. Good afternoon and thank you for joining our 2023 third quarter earnings call. With me on the call today are Jeremy Male, Chairman and Chief Executive Officer; and Matthew Siegel, Executive Vice President and Chief Financial Officer. After a discussion of our financial results, we will open up the lines for a question-and-answer session. Our comments today will refer to the earnings release and the slide presentation that you can find on the Investor Relations section of our website, outfront.com. After today’s call has concluded, a replay will be available there as well. This conference call may include forward-looking statements. Relevant factors that could cause actual results to differ materially from these forward-looking statements are listed in our earnings materials and in our SEC filings, including but not limited to our 2022 Form 10-K and our September 30th, 2023 Form 10-Q, which we expect to file. We will refer to certain non-GAAP financial measures on this call. Any references to OIBDA made today will be on an adjusted basis. Reconciliations of OIBDA and other non-GAAP financial measures are in the appendix of the slide presentation, the earnings release, and on our website, which also includes presentations with prior period reconciliations. Let me now turn the call over to Jeremy.

Thanks Stephan and thank you again everyone for joining us today. We're pleased to be here today reporting our third quarter results, which came in pretty much as we indicated when we spoke three months ago. As you can see on Slide 3, which summarizes our headline numbers, total consolidated revenue was slightly up during the quarter. Adjusted OIBDA declined 5% year-over-year, principally due to weaker transit, other results, and AFFO was down primarily due to higher interest and lower OIBDA. Slide 4 shows our revenue results by segment. Total US media revenues were slightly up on a reported basis year-over-year. Other, which consists mostly of Canada, was up 2% on an as-reported basis and 4% on an organic constant dollar basis. While we're speaking of Canada, I want to briefly discuss the pending sale of our Canadian business, which you may have read about in our press release last week. On October 23rd, we announced that we entered into a share purchase agreement for the sale of our Canadian business with Bell Media. As previously disclosed in our 8-K, the purchase price is CAD410 million, subject to adjustments, and we expect to close the transaction in the first half of 2024. This strategic transaction will provide OUTFRONT with additional financial flexibility through the deleveraging of our balance sheets. We look forward to continuing to work with our Canadian colleagues on the great business we've built together until the deal closes. So, turning back to the quarter. You can see the components of our US media revenues in more detail on Slide 5. Billboard, which remains about 80% of revenues, grew 2.6%, with solid performance in most of our markets. Transit revenues were down 8.6% year-over-year, given lower national rates, which I'll discuss in a bit more detail on Slide 6. Here, you can see our local initial revenue performance. Our local business was strong, up 6% year-over-year. But this was largely offset by our national business. As we noted on the last call, national faced some headwinds during the quarter with the writers and actors strikes curtailing entertainment ad spend and technologies efficiency, pushing some advertisers to scale back their ad campaigns. As a result of the weaker national revenues, our local/national split was 58% to 42% on the quarter, more locally skewed than our typical 55/45 split. Slide 7 illustrates our US billboard yield, which grew nearly 3% year-over-year to $2,800. This improvement was driven primarily by an increased number of digital phases, which typically generate more dollars per board than our static inventory. Slide 8 highlights our digital performance with digital revenues growing 5.3% in the quarter and representing over 31% of our total revenue, up 150 basis points from last year. Digital billboard revenues were up nearly 7% versus the prior year, primarily because of new inventory. We added 57 digital billboards during the quarter, raising our total to 2,105. Digital transit was up 1%, again due to additional inventory compared to last year. On Slide 9, you can see the results of our static revenues, which were down 2% year-over-year with slight growth in billboard being offset by a decline in transit, which was largely driven by lower bus revenues, a result of the national headwinds we previously discussed. Though static billboard growth remains modest, the fact it continues to grow is notable given the challenging environment and the fact that we continue to convert many of our best static boards to digital. With that, let me now hand it over to Matt.

Thanks Jeremy and good afternoon everyone. I appreciate you joining our call today. Please turn to Slide 10 for a more detailed look at our expenses. Total expenses were up approximately $7 million or 2% year-over-year, entirely driven by billboard lease expenses, which were up $10 million. Excluding lease expenses, costs were even lower versus the prior year period. As we've previously discussed, much of the lease expense growth continues to be associated with the new inventory being added over the prior 12 months. This growth rate has moderated as we have moved through the year and will continue to do so in the fourth quarter and into 2024. Transit franchise expense was down slightly as the increased share to the New York MTA from the inflation adjustment this year was offset by lower revenue share payments to our other transit franchises. Posting, maintenance, and other expense was down 4%, principally driven by lower production expense and a property tax refund. SG&A expense was up less than 2% versus last year, driven primarily by a higher allowance for doubtful accounts, professional fees, and office rents, offset partially by lower total compensation expenses. We remain focused on SG&A and expect these expenses to continue to be a lower percentage of revenue in 2024. Corporate expense was down just over $1 million versus last year. This decrease was driven by lower compensation-related expenses, offset slightly by the impact of market fluctuations on unfunded equity index-linked retirement fund. Slide 11 provides additional detail on the sources of OIBDA. US billboard OIBDA was down about 1% and billboard OIBDA margin was 36.7%, down versus a year ago, but slightly better versus the comparable period in 2019. As we've described in prior periods this year, the margin declined versus 2022, was driven by new and acquired inventory as this inventory is still ramping to our projected revenue levels. Looking forward to 2024, we expect billboard margins will improve versus 2023 as revenues on acquired inventory continue to grow. Transit OIBDA was down approximately $6 million versus the prior year due to lower revenue. While the Hollywood writer and actors strikes had an impact on all parts of our business trend, which disproportionately hurt transit given its greater exposure to the entertainment vertical, and the fall television advertising season in particular. Turning to capital expenditures on Slide 12, Q3 CapEx spend was $19 million, including $8 million of maintenance. $6 million decline in total CapEx versus the prior year was primarily due to lower investments in new digital billboards. For the year, we continue to expect total CapEx of $85 million. We believe 2023 maintenance CapEx will be approximately $25 million to $30 million, higher than usual pending completion of the office move to New York and Western San Francisco. We spent about $12 million on MTA deployment costs in the quarter. As we mentioned on our last earnings call and as a result of our continued expectation of negative aggregate cash flows, we recorded an impairment charge for this amount in the third quarter of 2023. Looking at AFFO on Slide 13, you can see our Q3 AFFO of approximately $76 million is down year-over-year, primarily given this lower OIBDA and higher interest expense. For the year, our AFFO guidance is unchanged from our last update. Please turn to Slide 14 for an update on our balance sheet. Liquidity is nearly $540 million, including over $40 million of cash and almost $500 million available by our revolver. As of September 30th, our total net leverage was 5.4 times, up slightly from our Q2 level. We remain comfortable with our debt portfolio with our next maturity not being until mid-2025, and approximately a quarter of total debt is subject to floating rates. I'd like to spend briefly on the sale of our Canadian business that Jeremy previously mentioned. The CAD410 million sale price currently equates to approximately $300 million at today's exchange rate, and we currently expect its tax proceeds to be approximately $290 million. Our intention is to utilize these funds in a manner to pay down debt and deleverage. We closed just $3 million of tuck-in acquisitions in the quarter, again, being a number of small deals we committed to in 2022. Given our current commitments, we expect to spend less than $10 million in the fourth quarter. And lastly, we also announced today that our Board of Directors has declared a $0.30 cash dividend payable on December 29th to shareholders of record at the close of business on December 1st. This dividend fulfills our estimated requirements for 2023. The $60 million of dividend requirements carried forward from 2022 represents a small return of capital during the year. With that, let me turn the call back to Jeremy.

Thanks Matt. The world has grown increasingly complicated over the last three months with various industry strikes, macroeconomic and geopolitical uncertainties permeating through the ad market. Despite these headwinds, we expect our Q4 revenue growth will be brought in the same range as Q3, with billboards again up low single-digits and transit likely to decline. Before turning the call over for questions, I'd like to briefly reaffirm some of the strategic actions we've taken and continue to pursue. First, as we've discussed, we reached an agreement to divest a Canadian business. The proceeds from the sale will allow us to delever the company by around a third of a turn. Second, we continue to focus on our G&A expenses and are evaluating various initiatives to increase efficiency across business lines. And third, we remain engaged in conversations with some of our transit partners, including the MTA, and are hoping to find mutually agreeable approaches that reflect today's transit environment. At the same time, we remain fully focused on operating our business, which continues to grow despite the environment. In our view, and that of many ad industry forecasts, out-of-home remains in the best position of all traditional media for long-term growth, given its increasing audience, increasing digitization, and improving data and analytics. We also believe that our growing automated selling channels provide an excellent opportunity to increase the pool of advertisers that utilize the medium. And with that, operator, let's now open the lines for questions.

Great. Thank you. We will now begin the question-and-answer session. Our first question comes from the line of Ian Zaffino with Oppenheimer. Ian, your line is now open.

Thank you very much. Can you guys just give us a sense of, I know you pointed to some pockets of weakness, maybe also help us understand some of the stronger categories, and the other categories that kind of maybe came in as surprise one way or the other? Thanks.

Thanks for the question. Yes, in some ways, Q3 was an interesting, frustrating quarter for us. Our local business performed extremely well. You saw that up 6%. And it's really our national business where we saw those categories that I mentioned. In fact, if you just look at the TV category and Tech, just between those two categories, our national revenues were down about $16 million, which equates to about eight points of revenue growth in our national business. So, you can see the impact of those headwinds. But if we take a step back from that, we just assume now that the difficult categories with tech and TV, outside of that real estate was a little bit down, probably worth calling out. Then on the positive side, we had a good dollar step-up and percentage step-up in legal. We had a good step-up in alcohol also, CPG up, and also in education. So, it's actually fairly broadly based on the upside and really skewed towards those categories I mentioned on the downside.

Thank you. As a follow-up, could you provide some insights on your REIT status? It seems that the market isn't valuing you as a REIT, especially considering your dividend and the debt you're carrying. Would it make sense to consider restructuring? This could allow you to use your free cash flow for debt reduction or pursue mergers and acquisitions. It would be helpful to hear your thoughts on this. Thank you.

So, Ian, it's Matt. I'll try to take that. First down, obviously, we are a REIT; we don't control the dividend yield; we control payout. And I appreciate you pointing out that the markets not appreciating our current status. We think being a REIT has a lot of value in avoiding or minimizing our tax liability. We're glad the structure; we think it works for us. As far as the balance sheet, clearly the sale of Canada and other issues that we're working on will help improve that over the course of the next few months as it closes and as our EBITDA performance improves. We feel pretty good about where the balance sheet is. And with that, we think the REIT makes sense for us in our current situation.

All right. Great. Thank you very much.

Thanks.

Our next question comes from the line of Cameron McVeigh with Morgan Stanley. Cameron, your line is now open.

Hey. Thanks for taking my questions. I had a couple. I was wondering if you could give just a little more color on what's driving the elevated billboard lease expense growth recently? And what your expectation for normal long-term growth rate? Thanks.

On the lease expense, as you know, we put a lot of inventory in 2022. We look at things we buy them in that second year of EBITDA performance. So, we're kind of in the middle, maybe toward the latter half of the ramp-up, the lease expense comes on immediately. So, it's fully expensed and the revenue ramps up a little slower. So, especially in such a large acquisition year in 2022, we feel that the impact is still in 2023. And again, as I mentioned, it should moderate over the course of next quarter and in 2024.

Got it. Thanks. And then secondly, last quarter, you had mentioned a baseline assumption of around mid-single-digits, I think it was 6.5% growth for the MTA contract revenue long-term. Has your long-term growth rate assumption for the MTA changed at all, just given what we've seen with transit? Thanks.

No. As we mentioned on the last call, we moderated our performance expectation at the MTA. There's nothing to suggest that our current forecast is anything other than absolutely achievable. So, we remain confident there. It's interesting because if you think of the categories that we just talked about, both of those are very supportive of transit. So, while there are headwinds for us this year, next year, we would absolutely expect that they could become a tailwind, with the hope that there will be a resolution to the actors' strikes. I think that's good news. And I just wanted to come back to lease expenses. This year is absolutely a one-off. If you look back historically, lease expense growth is probably more in the 2% to 3% range for the year, something like that.

Got it. Thank you.

Thank you. Our next question is from the line of Jim Goss with Barrington Research. Jim, your line is now open.

All right. Thanks. A couple of questions. First, just to clarify, did you say the after-tax proceeds were $290 million in terms of that sale of Canada?

Yes, the profit. Approximately the CAD410 million translates to around $300 million, with a little bit of tax leakage in Canada.

I was surprised there wouldn't have been a little more leakage since you've owned their property for a long time.

Going back to Ian's question, that's one of the benefits of being a REIT, is a good capital gain as part of that debt restructuring.

Okay. And on the entertainment side, I think you also indicated that transit had a bigger impact of a somewhat softer entertainment dollars than the other area. What is the share of revenue that is assigned to transit or you're achieving in transit in the entertainment space?

It's really the focus of TV campaigns. Entertainment, generally movies were up for us in the quarter; TV is down. And I don't know if we gave you the exact number, but more than half of the decline, almost two-thirds of the decline is in transit, with about a third of the decline in billboards.

Yes. The number we called out specifically for TV. That's where we really noticed it because there was essentially no new launches. But right now, the film category for us has been fine. No problem at all.

Okay. I think that's it for the moment. I appreciate it.

Thank you.

Thank you. We have no additional questions waiting at this time. With that, I'd like to hand the call back over to Jeremy for any closing or additional remarks.

Thanks Sam and thanks everyone again for joining our call today. I'm sure I'll be seeing many of you at various conferences over the next few months, but for those who are at home, please enjoy the upcoming holiday season. Thanks very much.

That concludes the OUTFRONT third quarter 2023 earnings conference call. Thank you all for your participation. You may now disconnect your lines.