OUTFRONT Media Inc. (OUT) September 8, 2026 Conference Transcript

Started. I'm very pleased to have Matt Siegel, CFO of Outfront Media, and thank you for everyone in the audience for joining us. Matt, thanks for coming.

Thanks for having me, and I apologize for those expecting Nick Bryan to surfer through just with me.

He's out sick today at a tough weekend. all right no worries no words we're just pleased to have you so i want to start with a with a high level industry question because i feel like following the outdoor industry you know for a number of years um it feels like something really good is happening right now and pretty different and what i mean by that is even if i back out you know the tailwinds from one time or episodic things like political or world cup, like the underlying growth that's happening for you guys at out front, that's happening at some of your peers is phenomenal. Like it's the best growth. Maybe, I mean, I'm going to strip out the post COVID quarters because that was sort of crazy, but just like normal economy, like the growth is really good. Yes.

And so my question is what has changed? What is happening? We think it's a number of things and we've observed the same thing. We are not as surprised as you are. We think we're impacting some. Some of it is what we saw in the first quarter, the market is coming toward out of home. You saw all three public companies report good numbers, kind of comparable to each other, comparable to expectations. In the second quarter, we think we kind of outperformed and distinguished ourselves. It was some help from World Cup, certainly. But I think for us, I can't tell you what the other guys are doing. We're putting a lot more focus on how we sell, what we sell. We've talked about, I've talked about with, I think probably everyone in this room, we've changed over our management. So we have a lot more focus on the digital ecosystem. We're pushing price more in both in transit and in billboard. We're spending more time focused on programmatic. I'm sure we'll talk about that in a little bit. The industry is getting more vocal about itself, kind of look at us. We're not just accepting the historical trend. We're talking about competing not just with each other, but outside of out-of-home. For years, it's been the cheapest CPM, which is an imperfect metric, but still a fact. And that gives us, I think, runway, which we're taking advantage of now and probably into the next few years to catch up on a good value. So a lot of things are happening all at once. We think we're contributing and frankly Nick's loud voice, both within the industry and outside, I think is getting a lot of people to take notice.

But people have tried this before, right? I mean, the fact that you're the lowest CPM out there, that imperfect metric, I mean, people have tried to sort of close the CPM gap, but it does feel like, I don't know, something's different. Is there anything around this? I think you've touched on this on some of the calls. It's hard to quantify that people just want the safety of something that's real in this highly digitized economy.

This kind of move toward IRL in real life, maybe a backlash to AI and other online media that they want to take something, they want to see something that they can't always touch it because it's pretty high up, but they can take their picture in front of it they can you know point to it uh they can see as a copy of something that they've seen someplace else right uh so it's it's you know real and we're benefiting from that uh we're pushing that we're in addition uh we're spending more time on what we call experiential some temporary things that we're bringing out that again you can touch them uh right now in duffy square we have a kiosk that you can actually touch for dancing with the stars uh we had something similar with Game of Thrones back in Times Square. So it's much more in real life than we've been in the past. And that's, you know, for us, that's not driving as much revenue or earnings as we'd like it, but it's driving a lot of discussion, a lot of marketing. People taking notice again at our media and say, oh, we can do some interesting things. So I think, you know, people are coming back to that.

Is there a thread of this that is just a new category, meaning the AI companies like OpenAI and Anthropic that are out there trying to get people to download their app, it's meaningful, or is that more noise?

I mean, I'm sure it's a real one, but is it? Look, it's certainly meaningful, whether it's AI, retail media networks, anyone with audience. We've had calls from, you know, retailers and others, can you help us sell advertising and things like that? You know, everyone thinks they can take dollars out of the U.S. media market. Media inflation is about 5% a year, every year for a while. So it can't feed everybody. But we think there's still an opportunity for us to gain share, not just with an out of home, but out of home to gain share in media and us to gain share within that increased Okay, great.

So one of the things that we do every year is we do this 10-year retrospective where we try and see where's the industry's growth coming from? not out front specifically just outdoor overall and it you know over the last decade and always comes back about the same number where it's a third of the growth comes from converting static to digital a third of it comes from tuck in mna and a third of it comes from same store uh static billboard growth um but you guys when i look at your mix you haven't really participated that much in mna right i mean even a few years ago yeah pockets but smaller relative to to your peers But now you're talking about now that your leverage is in a better position, maybe leaning into M&A a bit more than you have in the past. Is that fair?

Yes. First of all, on the M&A side, our investment in the MTA over the years, especially since we're not going to recoup all the spend, could count as M&A. It's an investment, but I wouldn't put it in the same line. Yeah. So we've been investing in our business. But now we have proactively improved our balance sheet. A few years ago, we had some some leverage challenges. We remember, we sold our Canadian business. As a read, it's sometimes difficult to pay down debt. So we thought we should, you know, do that in a big chunk. We sold the Canadian business and paid off some debt. We've refinanced all of our near term maturities. We have nothing maturing until 2029. And then everyone's favorite, organic EBITDA growth over the last year plus has really helped bring our leverage down to pretty close to the low end of our range. So we feel very comfortable in getting back into more material M&A. I mean, we've been doing tiny tuck-ins, you know, twos and threes that don't really move the needle much, but they're just adding to inventory. So we're looking at a bunch of things. We think there's some things that aren't for sale yet, but that will be. And so we expect to participate prudently, but a little more aggressively than we have in the past. So I think I've got $200 million to $300 million in my model for M&A? Maybe premature to say a number. I mean, the other guys put a number out, and they've been sitting with that number for a while. But we think we have very good financial capacity, financial flexibility, and the ability to stretch and deliver with the right acquisition.

Okay. Can I ask you one sort of related M&A question, which is, for the audience, can you explain what an upREIT structure is? And do you think that is something that you may do or should do to open up the envelope of potential?

So without bogging down to the REIT, you know, in the workings, an upREIT as a REIT who, you know, don't pay corporate income tax, is our ability to give someone shares in our REIT or in a REIT-like structure so they can defer their capital gain and be part of the REIT and they commit to hold it for X number of months. I think it's a one-year minimum, but it's negotiated. So as a REIT, you can set up an UPREIT. If we were looking at someone to acquire and they suggested a preference for the UPREIT, we would put it together within a month. Paperwork, some legal fees, and frankly, the first counterparty, the first target that we used, would probably benefit from being the counterparty and get their specific terms if they weren't included. We would put together an upgrade as soon as something material came along. Okay, that's great.

Can I shift to programmatic? So you mentioned earlier that you guys are leaning a bit more into programmatic. What is it that when I look at sort of the share of all advertising that's done programmatically, it feels like Outdoor still has a relatively small percentage that sold programmatically. Why is that? Is it still a person-to-person sale that requires a salesman? Is it a function of the mix of national and local advertisers? What is it that is sort of held back programmatic?

I think the out-of-home industry has just been slow to adopt. For context, overall media is what, 80-20 in favor of programmatic? And a lot of the, obviously online and stuff, grew up in the programmatic world. Out of home is more 20-80. I'm not sure we'll ever get to 80-20, but we want to go directionally toward that. First, a lot of our inventory and a lot of our revenue is still static, sir. So it can be sold programmatically, not nearly as easy, and not nearly as beneficial. A lot of programmatic depends on better measurement and metrics. So our industry is behind where it should be. It's slow to adopt and improve that. So as we continue to improve that, I think that'll get better. So the percent of programmatic will go higher for us in particular. We've hired the middle of this year a head of digital kind of push programmatic. He's putting us on more platforms. He in turn is hiring two programmatic salespeople, which once, you know, after in finance, I complained, why do we need salespeople with programmatic sales itself? Explained it doesn't. you need people to drive demand so they're specifically focusing on enterprise sales for programmatic so we're investing resources, time, money, technology to sell more programmatically and the attraction isn't so I can beat up my out-of-home peer and take more programmatic from him we think we can take money from outside out-of-home that's in the non-digital media budget that we're not attracting right now I remember early in this programmatic push, there's a little bit of anxiety around the sort of ad tech tax being larger than the sales commission that you would have with a direct sale.

Is that still an issue? Like, should investors think of more programmatic means a slight margin headwind, or is it something that's...

Not so much, actually. And we're still paying commission to the salespeople. So if you're covering Coke and they want to buy something programmatically, we're encouraging you to help them drive demand and not talk against our programmatic offering. So you're helping your customer, however they want to meet them, wherever they want to be. To avoid the ed tech tax, we just set a CPM minimum a little higher to cover that. I see.

Okay. That's great. So can I shift to the changes to your guidance? Sure. Okay. So So I think your AFFO guidance was double digit in the fourth quarter. You went to mid-teens AFFO growth in the first quarter and then low 20s in the quarter you just wrapped up. Presumably, a lot of that had to do with just the strength of the business that we talked about earlier. But what are some of the other drivers that caused such a big shift in the guidance, if there are any other issues?

So the strength of the business is really the driver. they mentioned double-digit revenue growth first quarter, second quarter, we've got into high single-digit revenue growth in the third quarter. So revenue is a key driver, I confess. It's a revenue growth so far is above our 2026 budget, so ahead of our expectations. We've used that excess revenue partially to enjoying it, striving higher EBITDA. We're investing some of that to help drive future or continued growth into 2027 and 2028. As I mentioned, head of digital, head of data, some other people, some more training. We're accelerating some of our tech investment. So, you know, the added revenue ahead of budget, partially offset by slightly higher spend in our SG&A line. um and then uh you know we we kind of um modified our interpretation of our mta uh expense you know it's an incredibly complicated uh issue this is you know we've had in the in the mta world or mta county world maybe 200 year storms in three years um i'm sure everyone remembers in 2023 in the spring, we impaired our investment, came out of the pandemic, all the businesses recovered, the MTA kind of flatlined. And looking at our models, we thought there's a very good chance, a high likelihood, we wouldn't recover the spend, we wouldn't get repaid by the MTA for the spend we're making to install the great digital network. So we wrote off that spend. Three years later, obviously a surprise, especially in the accounting world, updated model based on performance and focus and some other factors. We're not going to recoup at all, but we're going to recoup some. How do I account for that? What am I recouping against? I wrote off the balance. So with the support and help and input from our external advisors and their advisors, we came to this approach. We're still accounting for the MTA on a franchise cost basis on the minimum guarantee. And everything above that breakeven is EBITDA. So our MTA EBITDA is a little higher than we expected. So we never accounted for it differently. We had to clarify that as we got later in the year and look at the impact in the fourth quarter. So back to your original question, the benefit from the guide is mostly revenue growth, higher than expected revenue growth, slightly offset by higher SG&A spend, and, you know, helped by the improvement of MTA EBITDA.

Okay, that's great. um the sgna investments that you that you talked about that are sort of an offset to the good revenue growth but how should investors frame that is that more just like catch up investment because you felt like you were under investing in the past or is there really some some new opportunity that you see now that the business is on better footing so i think a little bit of both Mostly better footing, better visibility.

So we're hiring in training, in recruiting, other things to make our employees both in sales and sales support better at what they do. So that could be a catch-up. We hadn't been spending a lot on training before. We're hiring new skills and capabilities. We have people selling digital. We have a lot of digital inventory, a lot of digital revenue, But now we have a chief digital officer. We have a chief data officer. As I mentioned, the digital is going to hire more digital sellers. So I would say those are investments to continue our growth. We mentioned Get Programmatic, not necessarily to 80%, but programmatic growing faster than our other digital or non-programmatic digital business and certainly faster than our static business. And then in tech, I've been here eight plus years. We're always trying to fix our technologies, whether that's new investment or catch up. The tech we had last year wasn't working for us. We've signed up for a new CRM. We invested in AdQuick, which came with an operating agreement, and we're developing along with them capabilities from what they can do for inventory, visibility, availability, and responding to proposals, eventually moving into a self-serve model. So those are all things that we're doing to help us in the future, and I would say sitting here with my eight years of history, maybe things we've underrepresented in the past.

Okay, that's great. On the last earnings call, you announced this New York Jets partnership. And I didn't know if that was something that was like a throwaway comment, because I'm sure it's not big enough to be that needle moving, or if it's emblematic of something that you could do with other teams and other markets that is sort of a new frontier. So can you just explain what's in that Jets partnership and how much should investors think about?

So it's a lot of what you just said. It's all things. So it's not huge, but it's great. It's great for visibility. Basically, we're going to sell some of their inventory on and near their stadium, and they're going to sell some of ours to their clients, their existing clients. They're going to introduce us to their clients closer as opposed to us cold calling and saying, hey, I've got billboards in transit for you. They're going to make a warm introduction, so we'll work closely with them. I think it raises our visibility in the advertising world. You wouldn't have asked me about a random deal with the Jets. We got calls from other teams in the NFL. We were working with two NBA teams, a hockey team, and I think our World Cup performance gave, raised visibility on sports. So, you know, no one team deal is going to move the needle. But if we can stamp those out all over the place, it helps drive more demand. And frankly, you know, whether you're a Jet fan or a Giant fan or in between, it kind of gives you a positive vibe when you're listed as a name sponsor for, you know, the local Should people think about this, like this Jets inventory as the inventory that is around and getting to the Jets stadium or it's it's broader than that? Probably more of that and broader than they have their, you know, the stores in Manhattan.

OK.

We had the kickoff of this agreement in transit. So you'll see more, I think, more Jet advertising, whether it's earned media or purchased within our properties. But, you know, certainly we're very big in New Jersey, especially northern New Jersey. So I'm sure you'll see some benefits for both of us in and around the Meadowlands. And I wouldn't be surprised if you see some similar stuff eventually with red and blue, not just green and white. OK.

Shifting to digitization, you guys talk about converting maybe 100, 150 boards a year or something like that. um i i always do this calculation well i'm here's my question how far can this digital conversion go because it feels like when did you first start converting boards to digital 2009 or something is that uh yes okay we're 16 years in okay so how far can this go where that is you know 150 boards a year is it are we in this second inning eighth inning probably in the in the fourth or fifth inning.

So the issue of the governor I look at is really percent of revenue. So we have 36,000 static signs. We're not going to convert them all. Some of our biggest advertisers prefer static signs. So we're always going to have some and the static is going to barbell the iconic locations on the Westside Drive and Soho, the Flatiron Building, and turn left turn right uh near joe's diner and bob chevy yeah so those are going to stay and there's all kinds uh in between um our digital revenue is about 30 35 percent of our uh overall revenue you know probably next you know big you know milestone might be 50 percent yep which what we see in europe and australia uh and maybe more advanced digital so i look at the governor as to how much you know digital revenue we can put on um you know i would see our inventory maybe going 10 digital right now it's uh we have about 2 000 digital signs out of that 36 000 um so if that in the 36 000 is going to be coming down we're you know we trade when we do a new digital we often trade more than one for one sure you know the municipality might say take down three statics and I'll give you permitting for one digital or we take down a bunch of smaller ones, smaller posters. So the denominator goes down, the numerator goes up. So I would think maybe something more like 10% overall, whether it's 12 or 9, I'm not sure. But still plenty of room. You mentioned on the digital, and we started pointing out in our FFO guide, and I'm sure all the others do it since 2009, Not all these digital screens are designed to last forever. As a matter of fact, none of them are. So we've started proactively replacing, taking some down. Not because they're old. I'm not a young man myself. But just over time, keeping them fresh, keeping them looking better technology. They shine better. So that's going to be an ongoing part of it. We're not going to grow that in our maintenance capex. have an ongoing cost of our AFFO measure to basically keep our plant looking great.

So you're saying investors should not be increasing maintenance capex demonstrably, even though you're swapping out older digital boards.

We've been spending now. We're going to keep spending that. The other guys are saying they're not sure they're truthful. I can't remember the number we used to use for a digital conversion, 200,000, I think was the number. I think we used about 250. It hasn't really materially changed much. If anything, the cost of the steel costs went up with tariffs. We got tariff refunds. It's kind of, you know, the screens are similar price, you know, better screens with technology, steel and employee, you know, contract costs.

And still, is it 20% IRRs? Is that what you guys sort of target?

We started with you getting revenue lift of, you know, 12 times, you know, the first digital, very exciting, you know. Then the second one, the third one, you know, it's kind of a quality pyramid. Since I've been here, it's pretty much been 4X revenue lift. So I'm adding seven flips. Instead of having one static, I'm going to eight. So it's a different, a slightly lower price point. But still very attractive. And what I like most about it, even in finance, it's the least risky thing we do. We're taking a location that we know. We know where there's demand. We know where there's interest. And we're just putting more inventory on. And then with the push and the growth in programmatic, it should make it even more attractive so we can package it more easily with other types of media.

Is the only risk with digital just that the contract lengths are shorter and so it could inject more cyclical volatility in the business? Is that the only sort of downside?

I'm not even sure that's a downside. The flip side of that argument is I don't have as much frictional emptiness. So in a static, if I put something up for a month, January 1st, and it ends January 31st, and my next order is for February 15th, I have two weeks I haven't sold. For that same flight schedule, I can do four weeks of digital. I can squeeze in two weeks of digital and then start something else. So I think it's much more flexible. We haven't really seen the volatility related to digital, but we did see in the pandemic. short notice people were able to cancel. Technically we could hold them to, hey, you have a 60-day notice period. We thought long-term it didn't make sense to do that, but it's both beneficial they can call us Friday and say, I want to get this up on Monday. Great. Or they can call up on Friday and say, I changed my mind. My video game isn't ready for publication on Monday. I want to hold this off. Flexibility, I think, for us, net-net is good. We have to monitor it.

Okay. Any questions in the audience? Happy to take them if you have one. Just raise your hand. We'll get you a microphone. Can I ask one question about transit contracts? This is, I know your transit business is doing well right now, but I think if I pulled, you know, everyone in this room, 95% of investors would say, yeah, we don't really like transit, right? Like transit has these mags and it's a lot of CapEx investment. You could have been in that pool. And you'd be in that pool. So when we get to the, like, I remember when, I think you guys ran into some trouble with the, before you guys, I think were public, but when you were a part of CBS, some problem with the London Underground. Because the great financial crisis happened. And then this time it was because of COVID. And when I've asked in the past, it's sort of like, yeah, but it's integral to our messaging to advertisers. It's where the young people are. It's where the advertisers want to be. Therefore, we're going to keep doing this. Is that still true, or do you think there's been sort of a shift either for your company or for the industry overall that these transit contracts just aren't that attractive?

For us, a bit of a shift in that we're embracing transit now. The marketing people tell me maybe it's a bad visual, that sex is in the subway. I'm not sure you want to picture that, but you can do more things creatively underground than you can up on a billboard. I think what investors look at, they look at it's a finite tenor, whereas, you know, billboard, we have often, you know, renewable rights, you know, not forever, but for a very long time. Transit is finite. It's competitive. So you're rebidding against others who want it. In addition, it's accepting of a lower margin. And as you're pointing out, it's more volatile. You know, recessions, you know, with the pandemics and crises behind, hopefully that doesn't recur too often. But in a recession, transit gets hurt more than billboard. You know, so that's, to me, you know, I'm critical of transit, but I see the right now where we're enjoying the positive side of that volatility. yeah um the audience is great the franchises are good the ability to be creative is is great and you can tie it into your other inventory the problem is the contracts right um and what we ran into the mta with you know the construction and the write-off um we're generally out of the construction business we're happy to screw signs in we're happy to uh purchase signs we just don't want to be financially responsible uh for that we think that should be a different part of the business. We sell advertising. We sell it very well. We sell creative opportunities. So, you know, for us, audience great, franchise is great. The contracts need to be improved to reflect just the, you know, something mutually beneficial for us and the municipality. Okay.

So maybe, maybe in the future, if you do another MTA contract, the structure could be different. Sure.

Okay.

Than it is now.

It's something that everyone in this room can understand. you know it's incredibly complicated it's something where you know we're happy to sell the advertising we're happy to give them a return and if they want more screens we'll make it happen we just don't want to be that wevered you know boom or bust based on construction okay that's great those are all my questions one last check for the audience any questions in the audience all right Matt thank you so much You bet.