OUT - Earnings call transcript Q2 2018

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Operator

Good day and welcome to the Outfront Media, Incorporated’s Second Quarter 2018 Earnings Call. At this time, I'd like to turn the conference over to Greg Lundberg. Please go ahead, sir.

Greg Lundberg

Good afternoon. Thank you for joining our 2018 second quarter earnings call.

are Siegel, Chairman Chief Executive today Officer; Chief Financial call Matthew and Vice the Jeremy and Male, Executive Officer. On President and up question-and-answer discussion lines a of financial we'll After our for session. open a results, the

to You website. the Investor release and today's as earnings differ be conference call materials could results call today's This filings, may a has can cause of are audio on well. Form statements our available archive Relevant slide forward-looking and will XXXX XX-K. SEC find earnings from page that factors materially for call listed presentation Relations After include the statements. concluded, our including an there our forward-looking our these actual in in

this on OIBDA today of the other the outfrontmedia.com. will call. turn and Any We the the adjusted to an non-GAAP that, in on presentation, I our will of refer references will over financial made Jeremy. on certain OIBDA to be appendix And call slide measures non-GAAP reconciliations basis. are and With release measures to earnings website, financial

Jeremy Male

afternoon Greg. everyone. Good Thanks

his like already I'd brings deep begin in Warner Matthew significant a financial Warner and at A This Executive media Time us Cable future our for you who introduce Outfront. Chief who Time Financial Inc. I Before Officer, Vice President great Siegel, of number including background, June. know joined new Matt, may and to and a experience career at is

appreciate knowledge you get Matt, perspective. As and his you know sure his to I'm will

business, which was positive both were is we quarter. strong. been being importantly, This have We're And improvements remained solid. source the a indicated. declining, digital advertising, factors. Total saw National billboard many yields up. and we rate breakeven. increased reached growth in on growth second the basis the where advertising was of Digital Local our by reported driven growth further during primary quarter. to the that second billboard revenues turning this growth growth Now pleased X.X% static

Our down Transit business not perform the solid, did and during was while as X%, advertising on U.S. was well quarter result. weighed Media local overall the second national

I'll that into As third this now transit national our more quarter results we're say call. specific very outlook second on seeing I and But on half in can encouraging improving usual, later a the billboard, trend. both give color

billboard of With higher tax timing OIBDA interest slight the Due we a the solid had results X.X%. payments to and adjusted in expense, decline grew AFFO.

the hand now me call Let Matt. to over

Matthew Siegel

afternoon. And Thanks, Jeremy. good

line begin Slide our X. Let's top with on

up slightly. revenues Our reported were very and revenues were organic up X.X%

Jeremy increase U.S. both saw quarter a to in with meaning year, basis. local flat, condemnations due indication national advertising, X%. Transit same a the to to with Similar both of Looking which essentially quarter, level conversions drivers a compared digital was and our X.X% static. that that advertising Billboard and declined segments billboard last closer national advertising the advertising solidly. board early we on during and an underlying the and on billboards low detail, Media was reported flat growth organic relative growth included to of quarter. in at Billboard digital had Key grew to the last mentioned. yields, once in including in improvement an again first was momentum coming up good advertising, local growth X%

in course, again which was other markets performance digital strong of MBTA, growth offset to further once including of weaker partially Looking, transit key Boston our deployment. couple a posted the in portfolio, due areas, growth by

our and Sports to Marketing. which essentially segment, Other is Canada Turning

discuss a was our was Canada, Canada. Sports segment. a the portfolio between to reflects acquisition increase X.X% a on and impairment Organic sports operating accounting evenly our June of and new in Canada of goodwill of revenue charge. growth While subject digital and the reported in One XXXX, in billboard impact I standard marketing like balanced

its impairment of business analysis This that exceeded concluded Canadian income Some that did second interim quarter long-term we statement. went XXXX, resulting in of million been and an public. of challenging in decline fair reporting not goodwill impairment Canadian the before the has Canada meet was carrying there a determined since of In the you units may expectations we our required we value, its outlook. in reporting and that recall performance the $XX.X unit value charge somewhat revenue non-cash on

look Moving turn at income X the our down please Slide to expenses. a statement, for

see up Sports mentioned. down quarter, and during Corporate less were other just the were Marketing reported U.S. were that basis than I Media they X% and while on up. expenses impacts when down You Canada expenses can but considering a slightly year-over-year,

to Looking the new MTA still drivers, contract due at the part terms billboard but at billboard revenues. were franchise down, MTA to expenses the in up portfolio expenses principally lower were of year-over-year steady Transit revenues. XX% new due billboard transit of lease and

up revenues, picked Our we a in XX% were XX% margin. year. compared transit Overall to franchise last gross in display expenses of point over transit total

Our business during SG&A the principally due increased strategic expenses. to quarter development

for Additionally, growth. in operational build of we digital we capabilities adding transit important staff and future both are driver in environment out as Billboard, an

dedicated investing to both team, where there are national believe we is for client us. also sales where our from opportunity operation a continue see great We and then we and results, level, local significant our agency

growth revenue As increase see generated our and management million. $XXX.X the X, OIBDA adjusted expense you during X.X% of to Slide on can quarter

had our of Moving we accelerated as that expenditures. at in weighs in on second new out especially the cash X deployed growth digital to quarter where transit Note displays, rolling June. CapEx out continue end Slide capital flow. we XXX Boston

the XX guidance we digital communicated capital par are and pace, on quarter. spending quarter is the first are We comfortable in actively was total. conversion with our to million where which our of previously managed for $XX Our relative billboard annual

in let’s the we overtime. As to capital reflect New spending as L quarter, when went effect the lines. to November turn that, on MTA. subject advertising you know Williamsburg, deployment XX. from Brooklyn not MTA $XX.X do G With contract In completed the are our into subway contract & these our the last related recoupment We spent test of The on is York spending expenditures the Slide displays initial expenditures million. to since MTA successfully A second digital $XX.Xmillion cumulative

pictured can You these the full-motion for seen. can you that PowerPoint displays justice tell you look good And see as slide of three I many a how here. of have already doesn't do to video

office the end MTA year. constantly downtown, weighted XXXX, rollout be Our a were our plan, displays the side-by-side MTA with deployed from which we're has in teams shared evolving team to space estimated partners. and installation Together, X,XXX originally new working of till the the

of rollout estimated cost XXXX. We XXXX a now for previously $XXX these million likely on deployment station screens of are for a believe depending schedule. into also XXXX shift portion We X,XXX

upward where XXXX year, at now shift costs, spending are with will for the Looking how approximately many to pre-ordering $XX regard times, we start-up are million. overall lead displays next right by and we

a will is project a this complex exciting know be we busy rolls as We year. Importantly, will and process XXXX give out. updates you this

year on that transit cash in the OIBDA. Turning have AFFO digit XX the the performance would working to interest free dividend taxes flow XX% the to in our capital and second AFFO representing our I’d AFFO with relation XX, related is dividend offset note were OIBDA AFFO’s our illustrated conversions. higher the higher items on AFFO. digital more and Slide basis last is months of cash displays payments of low-to-mid XXX%. with grown some digital basis, particular, in payout growth XX, ratio In growth impact is reflects Slide with on higher on Annual and billboard On single Boston, an unchanged. guidance increase was our taxes by of adjusted in-line CapEx reflects expenses. and improvements this quarter. in cash dividend This normalized for a the

The Directors have five partially approved Our to per due ratio by was next and increase Slide increase conversions. our offset in digital $X.XX MTA of on we principally Board it leverage times. shown by our quarterly in net growth XX, OIBDA, up dividend on debt, billboard was month was and at spending This ticked to outstanding share. last

Our next in the X.XX% are maturities notes. significant and include revolver our XXXX, senior

including capacity. liquidity cash solid and $XXX.X available at Our million, remains revolving credit

equity of million ATM liquidities potential program. are $XXX Another at-the-market or source offering

balance think comfortably sheet initiatives. that a well-positioned can support this our growth is I

some value. an With with and vision, back and entrepreneurial which is out-of-home combination forward my look business, Before and to development let in both Outfront, like from experience, over now my remarks, working conclude prepared This team industry to of here focusing a me on existing particularly been all here Jeremy. management The of the everyone you great at together instrumental with look people I’d share thoughts education. my working forward shareholder initial talented first also knowledge to I environment team to Outfront. has Outfront’s to two our of exciting at enhance opportunities. the growing finance I new has turn with that I months

Jeremy Male

So single significantly low-to-mid business, in driven growth in referred we thanks billboard at digit And strength particular range, earlier. moving and revenue to local the in to improvements third to national that improved our the Matt. time, XX, expect this point I to Slide growth on reflecting accelerate in by quarter in continued

television, to the with entertainment growth second health Looking revenue at into X% and position U.S. pharma. Interesting, and headwinds technology months, and in come industry been The services, terms total the of last retail. have our movements technology. from and food it in contribution, along over XX revenues, out professional moved verticals biggest revenue of and largest beverage, movies, has our of has putting

When others. the categories, improvements as it that growth weaker You'll well we we in see note are that essentially improving, nature. in national all as say in categories national these reflects

factor portfolio. in our our the positive growth is outlook Another digital continued driving

XX, nearly XX.X% digit digital points of both quarter billboard from we exposure see last is year. total strong you three assets. and of growth double up As on transit our second At the Slide can on revenues, had revenue our

first format growth Francisco. again are build-out. Boston yields the under XX%. small New the our from just we we Liveboard San Liveboards of which end displays Boston, for same-board driver ongoing with long of MTA this digital digital units revenue transit billboards, other, in are during ended The that In York the through inventories video both continue. for deployment X,XXX growth quarter main in of new in it at XX% too expect driven growth our over And basis. conversions and this at units importantly, growth by This In higher rate digital. be on acquisitions first XX%. from before and coming and was yields was the to revenues won't a that over where quarter MBTA Caltrain well worth year through the bode of XX% the extremely up noting of with displays, revenue seeing our are was billboard growth more and the of the station We deployment X,XXX And it’s

digital traditional Operator to half out-of-home benefits, attribution. into strong grow indeed. advertising and continues the questions of the because and be Transit and its are good digitization, line integration missed. skipped brand future or are ROI a generally social is producing industry. audience I both and being the inability and mass targeting of data Billboard market more reach, and bright in better the footing to feel please. and beyond. returns, solid now in with of the elements insights investments year about mobile second also A huge and increasingly for Our the impact great this enhanced open digital and It enriched revenues the keys integration let’s by tailwind for These future growth broader certainly

Operator

go [Operator we And to Instructions] Alexia JPMorgan. with Quadrani will

Alexia Quadrani

you. thank Hi,

If great. in year, sort spending give national that the for outlook the could your of be detail more you in a back bit half would of positive

what I market. anymore Lamar that vertical terms saw into this and driving think in I'm earlier back verticals optimistic more wondering seeing you mentioned outlook of back color can what's sort in the of the you're the half? telecom if they morning coming give

Jeremy Male

all actually I it's usual, of public question. remember reporting It's such the important Alexia quite Yes, actually think, competitors. us that the you also But for seeing their we're be our for the to guess, for results right the point five now, verticals look strong when thanks that example, is, might been to the interesting, that six which is recently, different. the growth first And local, we verticals footprints companies of now three quarters, from for the has the not somewhat companies is of same I actually it's the second or really last as forward look that some as of strong. sort at half

comp programs of lot is efforts put training, into a I incentives. other think, our and force well. sales emphasis We executing into and

boots on that I difficult on a team half. But of people certainly out think XXX sort a we've augmented second signs those the the when you got National we've sort lot that's growth. also of Street, to local boots the and consider this of of we're support that while. and improvement Street in further for seeing was in out

As they're there buying investing we the well, chain into sort of we've also as up sort much, look agencies and also that food really sales the in team at direct. team very a directed going strategic now, that's of client been

I SWOT think team. benefits the earlier some stage, at are that seeing they from

as I next and continuing think year perform extremely improvement, greater we'll up. to certainly into we go Alexia, well So benefit but forward see even picking national broad-brush local

Alexia Quadrani

that different businesses your have that benefit at political you correctly this Am guess, I to any year? And have just previously all see not remembering said a from don't expect did you and point different footprints guys you you I to different therefore, and outlooks. political, follow-up,

Jeremy Male

don't We XX sort of But, any on that top b) at portfolio, from you than of that political. rather transit see we look our can't markets the any really billboard a) No. benefit it's much Alexia. assets; markets smaller when directed political, more political any at our take and

I example has in before our And that given, think, the well, difference is different be that's is the it, think, very, if – like, differences maybe I largest our our Both of a client is Lamar's sort different of probably very, now, a Lamar – good the portfolios said referred example it's right but asset best clients believe, we've in Apple. basis. very very, Barrel. you Cracker that I set, to may

Alexia Quadrani

you very thank Right, much.

Operator

from a We’ll now take question with Marci Fargo. Ryvicker Wells

Marci Ryvicker

be in calling it or you quarter? of keep ours? in local teasing do local your definition solid. you solid QX what What driving it's and did because than Can solid different local may the Jeremy, just Thanks. quantify second

Jeremy Male

we business, look in back As like transit, – – that was And up have quarter, local the X.X%. around in second in we the to billboard X.X%, billboard transport local And our condemnations. after up that. business, around our was our were something revenues in

Marci Ryvicker

quarter? And getting third quarter, stable in better is the then in third it or that is the

Jeremy Male

It’s in improving third quarter. the

Marci Ryvicker

which Okay. And mentioned X%. Boston. you negative mentioned the contract, some big only But in transit positive the caused one you

transit to So that be the which were ones down? struggling that were caused

Jeremy Male

been our the on portfolio, now. transit, in moment, catching know, right cetera. When Metro-North, subway it's digital York, has we're streets particularly portfolio New changes for two York. you obviously has look been system sort to in at And at environment somewhat two to a the the as environment of York a rapidly been of going build-out in the One the sort New us, the then market et a and be is New big competitive at it's But for in in and up a us. business you through of competitive build-out There competitors. have quite digital the from –

Marci Ryvicker

what then related and What AFFO? with but going $XX to impacting Matt, the expenses? is going is And Okay. that not on higher, can million in it's you restate

Matthew Siegel

feeling shift later XXXX – Sure. screens year we're spending XXXX, our It's have costs, so early only have already of really we anticipate we life of in which just and some that buying and in for don't a time. some project's initial where some is XXXX we paying startup course, And the deployment. for of anticipated we

Jeremy Male

of in say, pace. of the Marci, that sort as into we've sort terms contract, this, nine of with much very sort that I months our was scheduling way just we're And going to feeling of we're also costs a know, XX-year you of sort a MTA a we it's say months with year likely few next into we of let's be startup think year, of screens in one-off sort more this took XXXX. to from some the of and shift knowledge, benefit that associated

Marci Ryvicker

Is mixture? it OpEx CapEx, a or

Jeremy Male

it. from discussed MTA. the line bit quite know, it of But like on item its detail that you from new okay, we're of As balance I separately have the in sheet for but separating before – recoupability think, a OpEx, it's because a mean, we shows than I it CapEx, rather

Marci Ryvicker

It it's didn't going higher, then you're OpEx it understood. I operating understand how to I sort AFFO. like But Okay. understand that new in that. wasn't or of expense I if item line so some sounded impact shifting

Jeremy Male

Yes.

Sorry for any confusion.

Marci Ryvicker

very Okay, thank you much.

Operator

our with from take Research. now will We question Barrington Goss Jim

Jim Goss

properties, wondering that? write-down more was type all the U.S. I the stand do similar they with you properties, It you they in even First, Thanks But you added you though Canada. where in thought there? at Are your were weren't position to obviously requalified. seemed rethinking like some and

Jeremy Male

set year, question great which with your in a perform the to And where Canadian test were we – last for wasn't set balance for our we there time overlaid continue It business I and future. was by digital carrying at carried the matched assets, remember onto of a our acquired expect more there. Jim. this we of in that of business out. assets, them had sort up Thanks many Yes, the years impairment that to by legacy associated we sheet that are value

particular our And strategy as improved within is a no our performance business up forward, in that good guidance included looking Canadian there. in tell it's you're fair sort quarter. change third the you So from to of

Jim Goss

bids that if assets? in were inclined properties more looking or the development would M&A look the say, be organic major more get you some you in and this think, Okay. like for out-of-home Do each were the you, I you in on example? mix terms of street their transit touching also companies or entrenched positioning at have you would seem it then the you airline in systems, of systems does before, transit, to future, in non-REIT own versus the – you like others have And REIT activity but And and the like for furniture.

Jeremy Male

guess, Jim, that, a billboard by our in first business. is mean, we is I revenue that the lease yes, number to that, – billboard build two develop we billboard the in big is have organically business company I point fact And very the we holding continue U.S.

often it drivers. be our quite can are ability urbanization win Miami, you Washington, because that guide those transit, to York, Quite as think continue at better not that in billboard there We the Boston, it's be, in through player that strong think, additive opportunity the growth we billboard for be of and through and organic U.S. well in first smaller Obviously, think as in new a just contracts. and New will We it's part to from the San business. contracts, to is Los growth And acquisition benefit time, what for growth to one growth business When portfolios not Francisco. contracts there in We there out the be you soon-to-be convert to in which placed will also you number in often purchase. the are Angeles growth could a is win digital, in transit to the really in where transit portfolio the other to future. – interesting because transit acquire with look requalified. have I business

Jim Goss

but that then be you in consider could And primarily activity be so – billboard primarily they the space? Okay. would there would M&A,

Jeremy Male

Exactly.

Jim Goss

thanks very much Okay,

Operator

this time question Imperial At Instructions] Miller take Capital. I from David will [Operator a with

David Miller

Hi.

you $XX.X the questions to the Matt, meet for First of you. Nice on of Couple million. welcome all, SG&A, community. to

development that was due expenses. the mostly mentioned business You'd to increase there

Thanks DCF I Canada on Is Or And to In what the impairment I beat business? want this now goodwill? a and taking drill to just sure carrying other want willing versus impairment value give a don't – just words, worth us to color is you're of horse. the to charge, before? dead mean great? some understand. charge the to the that'd the down all very is business just much. be the where I sure make you're of due value impairing of I also that, I and on make you're you're that business on understand. then to in If due just

Matthew Siegel

The first. the analysis Let looking the second one me at model. is impairment answer long-term

DCF of numbers the it's trip once compared model sheet business, and our we looking the at valuation balance less. look we the that worth test, value at Canadian As as Canadian and the to the business, you see said, for of have it's the that

So mark-to-market assets XX we Canadian of effectively our value of as the June

David Miller

And on the SG&A?

Matthew Siegel

business think and been a growth the area our for bit, strategic people, hiring important for We've down we with little of that's primarily future, Thanks in We've David. our driver technology SG&A, XXXX. investing expenses. numerically been vendors, some drilling development necessary working some platforms. new and

David Miller

Appreciate you. Thank it.

Operator

at the turn further there it additional time. speakers or I'd any back questions appears this like conference remarks. And closing no to are our to for

Jeremy Male

conferences. afternoon. everyone, much, call. meeting look coming for Good you very to again. attending I forward at over Thanks of the Thanks the many weeks investor

Outfront Media (OUT) 8 Aug 182018 Q2 Earnings call transcript