Outfront Media Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Organizational Restructuring: Underwent large internal reorganization, rebranding local sales teams as commercial and national as enterprise. Redesigned Brand Solutions Group, centralized operations/real estate, strengthened revenue operations/sales enablement, reduced sales regions from 4 to 3.
• Leadership Changes: Mark Bonanni promoted to CRO of Commercial Sales; Jim Norton hired as CRO of Enterprise Sales; Brad Alperin leads Brand Solutions Group.
• Financials: Q2 OIBDA $124M, AFFO $85M. Billboard expenses down ~$7M year-on-year, transit expenses up ~$3M year-on-year. CapEx $26M, including $7M maintenance.
• Digital Focus: Large opportunity with underserved digital media buyers; concerted efforts to engage digital agencies on digital out-of-home's unique power.

Segment Performance

• Billboard: Revenues down 2.5% primarily due to exiting 2 marginally profitable contracts in NY and LA. Excluding these contracts, billboard revenues would be flat. Static billboard revenues down 1.6% during the quarter, digital billboard revenues down 4.5%. Billboard yield up ~0.5% year-on-year to nearly $3,000 per month, driven by digital conversions.
• Transit: Grew 5.6% with 17% growth in digital revenues, offset by a 2.9% decline in outstanding revenues. Enterprise and Commercial contributed relatively evenly to transit growth. NY MTA up in mid-single digits.
• Digital: Grew 1.5% in the quarter, representing over 34% of total organic revenues. Programmatic and digital direct automated sales up nearly 20%, 16.5% of total digital revenues.
• Commercial vs Enterprise: Commercial (previously local) up 1.4% year-on-year; Enterprise (previously national) declined 4% in Q2, with mid-single-digit transit growth offset by weaker billboard results.

Guidance

• Q3 Expectations: Consolidated revenues expected to accelerate from Q2 level, up low single digits, driven by double-digit transit growth and low single-digit billboard decline. Excluding exited contracts, billboard revenues up low single digits, consolidated up low to mid-single digits.
• Full-Year: AFFO mid-single-digit growth, ~$85M CapEx, $35M maintenance CapEx, interest expense ~$145M.

Risks

• Market and Contract Risks: Dependence on key advertisers and contracts; potential impact of market fluctuations on revenue and margins.
• Operational Risks: Challenges in executing organizational restructuring and realizing cost savings; potential delays in digital conversion and adoption.

Question and Answer

Q: Are you through the heaviest period of changes?

A: Restructuring is ongoing; work continues on sales strategy, workflow modernization, external demand, transit focus, and operational excellence.

Q: Weakness in entertainment vertical?

A: Absence of some key studios; expecting improvement in Q3 with committed deals.

Q: Transit static decline and margin expansion?

A: Static decline due to structural shift to digital; ~$18M-$20M annual cost savings, half felt in 2025, half in 2026.

Q: Billboard margin and cost levers?

A: Margin held up; ongoing portfolio optimization and cost management.

Q: Regional variations and LA footprint?

A: No significant regional variation; focus on independent agencies and digital agencies in LA for growth.