Good afternoon. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Outfront Second Quarter 2023 Earnings Conference Call. All lines have be placed on mute to prevent any background noise. After the speaker’s remarks there will be a questions and answer session. [Operator Instructions] I would now like to turn the conference over to Mr. Stephan Bisson, Vice President of Investor Relations. Please go ahead.

Good afternoon and thank you for joining our 2023 second 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 up 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 our 2022 Form 10-K and our June 30, 2023 Form 10-Q which we expect to file in coming days. 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. While our revenues reached out, mid single-digit guidance provided in May, they were a little below our original expectations and budget. The quarter got off to a good start, but business softened towards the end, particularly in June, where much of the late booking revenue we had experienced in recent quarters did not materialized to the same extent. As you can see on Slide 3, which summarizes our headline numbers, total consolidated revenue grew 4% during the quarter, reflecting about 3% growth in our core business and around a point of growth from various acquisitions over the prior 12-months. Adjusted OIBDA declined slightly year-over-year, due to transit and other, while AFFO was down primarily due to this lower OIBDA and higher interest expense. Slide 4 shows our revenue results by segment. Total U.S. media increased nearly 5% on a reported basis year-over-year. Other, which consists mostly of Canada was down 7%, versus the prior year on an as reported basis, hurt by the stronger U.S. Canadian dollar exchange rate. On an organic constant dollar basis, other was down 2%. Breaking this down further on Slide 5, you can see the components of our U.S. media revenues. Billboard, which is about 80% of our revenues, grew 6% with good performance in most of our markets led by New York and Miami, which continue to be particularly strong. As we had anticipated, our transit revenue was again essentially flat versus last year. The details behind our local and national revenues in our U.S. business can be seen on Slide 6. As you can see, national growth outpaced local this quarter, up nearly 6% year-over-year compared to locals almost 4%. The strength in national advertising was seen in the strong performances of…

Thanks, Jeremy, and good afternoon, everyone. We appreciate you joining our call today. Before discussing expenses, I would like to pick up where Jeremy ended, with the non cash impairment charge we recorded this quarter in our transit business. There is a lot to explain. I will do my best and also note that our 10-Q which we expect to file early next week, will detail much of what I’m about to review. After two strong years of growth, the recovery in transit revenues seemingly stalled in the first half of 2023. Because of this slowdown and our forecasted continued weakness in the back half of the year, and based on our revised financial model, we do not expect to recoup the deployment spend made on the MTA franchise to-date before the end of the amended base term in 2030. Therefore, we are reducing the balance sheet value of the prepaid deployment costs and intangible assets on the MTA franchise. This reporting action does not change the economics of a contract and we anticipate some of the many steps we are currently taking to improve performance such as our connecting MTA digital operating system to demand platforms, enhancing the audience data available for transit, and increasing targeted sales incentives will all contribute to enhancing our revenue growth. We have now revised our expected revenue growth to an annual range of 5% to 10% after 2023, and throughout the remainder of the amended base term of the contract. Of course, revenue growth above this range could provide an opportunity to recoup some or possibly all of this perspective continued investment over the base term. In addition, we are also reducing the balance sheet amount of smaller transit franchises, including [indiscernible] and San Francisco, which is also experiencing a reduction in ridership…

Thanks, Matt. As you may have noted from much of our commentary on today’s call, our Billboard business is doing pretty well, especially in the current uncertain ad climate that others have mentioned. National sales is somewhat challenged by the writers and actors strikes in Hollywood. As many of the typical fall and winter television launches have either been put on hold or postponed. While this launch delay impacts both parts of the business, it disproportionately impacts transit, which is more skewed towards media. Based on our visibility as of today, we estimate that Q3 total revenues will grow slightly. With Billboard continuing to grow in low single digits and transit are likely to decline. We are taking many steps to improve our revenue performance within transit which Matt touched upon earlier. We are particularly hopeful that connecting the New York MTH programmatic and digital direct selling will improve trends beginning at the start of 2024. We also continue to be focused on our great and growing Billboard business, which represents approximately 80% of total revenues and as of today, essentially a hundred percent of total EBITDA. In fact, as of the second quarter, Billboard had grown both revenue and EBITDA by nearly 26% when compared to the first half of 2019. This represents CAGR of around 6% despite the 18-month interruption posed by the pandemic. This growth is evidence of the strength of both out front and the entire Billboard in industry. At the end of the day, we believe in the long-term success of both our Billboard and transit assets. The growth drivers that we have outlined at length in the past, at digitization, improving data and insight, mobility, automation, and the outdoor value proposition remain as true today as they ever have been. And with that operator, let’s now open the line for questions.

[Operator Instructions] Your first question is from the line of Ben Swinburne with Morgan Stanley.

I guess, one kind of clarification question on the MTA and then maybe a bigger picture question. I think Matt, I think you mentioned, you expect to turn free cash flow positive on that contract sometime during 2024, but then I think you also mentioned a cumulative free cash flow loss of 50 million sort of beyond 2024. I just want to make sure I heard you right, and if that is just the sort of MG growing faster than revenue. I just want to make sure I understood that the moving pieces there. And then, Jeremy, you made the point I think quite clearly. You know, your company now, the EBITDA is all Billboard. And so, what are the other options you are thinking about as it relates to transit? Obviously you have a contract, but what can you - what is on the table for you guys in terms of trying to navigate the situation given it is really not that material to the cash flow of the business anymore.

Maybe I will take the second piece first and then Matt can go back to your first question. So I think fundamentally, there is transit advertising has been part of the world of out-of-home for many decades and a fast important and growing piece of the out-of-home market. What we unfortunately have now is we have a number of contracts that were effectively set pre pandemic. And while at the time they were written, they were absolutely valid, typically is in transit, particularly led by audience, which is for most part down around 30% in New York and higher than that in a couple of our transit market. Essentially, what we need to do is look to how we can reset expectations of the transit operators. And those are the discussions that we are having right now with a number of our transit advertising partners and in particular, with the MTA. So it is not actually the business that is - and there is nothing wrong with transit advertising. It remains extremely effective. And remember that, the vast, vast majority of our clients buy both Billboards and transit from us. But what we need to do, and we are working very hard on, and we hope to have some, more positive information on that as we go forward is, resetting those transit company expectations.

Ben, I would just like to clarify the numbers from the first part of your question, will be a cash flow negative 50 from the start of the third quarter, end of the second quarter in 2023. So now, through 2030, the end of the big the base term, we think we will burn off that 50 by sometime in 2024. So from there forward, we will be cash flow neutral.

I see. That is with the 5% to 10% top-line assumption?

Yes.

Your next question is from the line of Richard Choe with JPMorgan. Please go ahead.

Hi. I just wanted to follow-up a little bit on the MTA. I appreciate that, you are re-discussing the contract with them. But is there something that can be done within the company to kind of right size the business given the new outlook?

There are always things to do, and we are considering a pretty wide variety of things both within the business, within the portfolio, not just the MGA and other transit renewals as they come up. And nothing we can, highlight or go into detail now. But, I think there is a series of conversations and efforts. But, nothing to report on success just yet.

I think, Richard, maybe just following up on that. If we look back to 2019, we had in round numbers, a $500 million transit advertising business, making a $100 million of OIBDA. And the MTA contract in particular in 2019 was actually working exactly as we had assumed, and we were recouping part of our investment in 2019. So when we look at the business today. I mean, it is still a big business. We still have to sell it. We still have to operate it. We still have to manage it. What we need to modify is the way revenues are essentially split between us and our transit partners. That is the key to this, and that is where we will be putting or where we are putting up our time and effort right now.

Great. And then follow-up on the Billboard side, I mean, both the digital and static were doing well. I guess there is some concern that national advertising might be a little bit soft. Can you give any kind of color on what you expect out of national advertising and maybe even some local, regional comments excluding maybe the entertainment and the Hollywood writer strike?

So, what is really the main impact of the actors and writers strike is that is, as I mentioned in our prepared remarks, it is really the sort of TV four launches that have really been really been pushed back. There is some movement in movies, but at the moment we - that is not a particular concern, but we are obviously keeping an eye on it because depending on how long that how long this continues there could be further impact. I think as we look at our business in Q3, we are expecting modest growth in our national Billboard business in Q3. We believe our national transit business will be down reflecting that the strikes that we just talked about and our local business will be up in the likely low single digit range.

Your next question from the line of Jim Goss with Barrington Research.

In terms of the strike will the - your Billboard presence be impacted? Just when - I mean, I assume there is going to be a promotion of the movies that are out there right now. There have only been a couple that have been pushed off and there is tend to be later in the year. So is it a matter of the timing you are facing and the duration of the strike, or are there some other issues and will it be localized in certain areas, or is it they are pretty much the same across your markets.

Actually on movies at the moment, as I mentioned that that is actually not an issue, I think movies are likely to be fine in Q3. It is really more TV actually where we have been impacted, where typically in September we take good dollars from the networks to promote their full schedules. So not an issue on movies. As I said, there may be a little bit of movement, but that is not that is not a huge concern for us right now in terms of where the media in general is very much skewed towards New York and LA so they would be the markets where we would notice that impact most.

And with regard to the dividend, the statement declaring the $0.30 now and expectations for another one in the fourth quarter, there is a reasonable interpretation that despite the fact that you are projecting AFFO to be down that, and it would imply a lower dividend, that it is a non-cash charge and you want to give confidence that you will make it through this and hopefully have an opportunity for the next year, even though you would be paying more than you would be dictated to by your general terms of agreement with as a REIT.

Yes, I think based on our forecast, we could end up paying slightly more than we were required to. We had a carry forward from last year. I mean, some of the recalculations are complicated. So we had anticipated sometime in 2023, a need to increase our dividend. We no longer feel that is going to be necessary. But we think we are pretty close to our requirement with, four quarters of $0.30 each.

Okay. So, basically, you were being somewhat conservative earlier on, and it is for you to do that.

Yes. It seem to be settled.

Yes. And finally, with regard to the write down, are there any accounting implications since some of these assets have been written down to a great extent? Are there things we should look at in terms of how things are recorded going forward, aside from the extra $50 million that you think you will be paying in the future, for these projects that will also wind up being written down?

No. Our plan is to use the same accounting we have been using for the MTA activity, from the inception. We will obviously review that with our outside advisors, experts. We will continue with that. We give a heads up, just to expect that we will continue the impairment, in the third and fourth quarter, which is really a continuation of this impairment we are doing now. And probably last a little bit into the first part of 2024.

Your next question is from the line of Ian Zaffino with Oppenheimer.

I know you talked about, at least TV being a little bit weak. But can you maybe give us kind of around the world of - what you are seeing in each category, maybe the notable strengths? And then I think you have already mentioned the notable weakness, but any other color you can give there would be helpful. Thanks.

So, I mean, looking at Q2, we saw strength in legal, travel, alcohol and entertainment was strong in Q2. I mean, it was, up 10% and in dollar terms, it was actually our largest growth category up over and $8 million. Categories that were weak for us in the second quarter, financial was weak, real estate, cannabis actually was down, insurance and health and medical, they were absolutely kind of weaker categories in second quarter.

Okay. Thanks. And then, just one more if I could squeeze it in. Would be on the breakdown between static and digital, is there any way to tell us maybe what the apples-to-apples was? Let’s just say what its static action actually grow if you consider some of the Billboard conversions to digital, and the backing out maybe some of the Billboards that you added. Is it directionally, can maybe give us direction? I mean, you may not have the exact answer, but, any color you could kind of give there to see just how the static business is performing, net of call it the conversions, et cetera.

Alright. Yes, it is Matt, I can give a try, but the numbers are very hard to calculate that way since we are converting on a relatively fluid basis what Jeremy had in his prepared remarks static is up 1% and very notable because we are taking most of their good players on an annual basis and putting them onto the digital team. So they are performing their 1% growth on a same store basis would likely look much, I know much higher, but notably higher if we kept all those players back in static. But since we are not - it is very hard to get comparable. Same store calculation.

I think the other one. Just adding onto that, Ian, is that, when you have a portfolio of 40,000 Billboards, obviously there is a lot of ins and outs, do you know what I mean. All the way through across that. So, as I say, I think, the way we have just described it probably gives you the best feel for how we believe the selling businesses performing like slightly ahead of about 1%.

And at this time there are no further questions. I will turn the call back to Jeremy for closing remarks.

Thanks operator. And thanks everyone for joining our call today. I look forward to meeting with many of you at various conferences over the coming months, but for those who I don’t enjoy the rest of the summer and we look forward to presenting our Q3 results to you in November. Thank you again.

This concludes the Outfront second quarter 2023 earnings conference call. Thank you for your participation. You may now disconnect.