OUTFRONT Media Inc (OUT) 2025 Q4 法說會逐字稿

Good afternoon. Thank you for attending today's OUTFRONT Media fourth-quarter 2025 earnings call. My name is Makai, and I'll be the maoderator in today's call.

(Operator Instructions)

At this time, I'd like to pass the call over to our host, Stephan Bisson with OUTFRONT. You may begin today's call.

Good afternoon, and thank you for joining our 2025 fourth-quarter earnings call. With me on the call today are CEO, Nick Brien; and CFO, Matthew Siegel. After a discussion of our financial results, we'll open the lines for a question-and-answer session. Our comments today will refer to the earnings release and slide presentation that you can find on the Investor Relations section of our website, outfront.com. After today's call has concluded, an audio archived replay will be 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 2024 Form 10-K as well as our 2025 Form 10-K, which we expect to file tomorrow. We will refer to certain non-GAAP financial measures on this call.

Any references made to OIBDA today will be made on an adjusted basis. Reconciliations of OIBDA and any 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.

With that, let me hand the call over to Nick.

Thanks, Stephan, and good afternoon to all of those listening. We are pleased to be here sharing our fourth-quarter results as well as our 2026 outlook. As has become the custom, I would like to quickly highlight some of our accomplishments in 2025. It was a busy year that was full of change, but I'm happy to report we have made significant progress on the four strategic imperatives I laid out last May. First, we've made great strides on optimizing our sales strategy, primarily through a broad reorganization of our sales force.

We've created distinct enterprise and commercial go-to-market teams and ensured there's experienced leadership throughout the entire organization. To that end, we worked diligently to make sure that the key roles were filled by the best possible leader, whether they were found internally or externally.

Second, we have made important progress in modernizing our workflow and processes. We have centralized many of our back-office functions as well as invested in better sales tools such as Salesforce and AWS. We will continue to invest in our technology and tools to further accelerate our growth and ROI as appropriate.

The latest of these efforts was our investment in exclusive commercial arrangement in AdQuick, a leading independent out-of-home planning platform, which we announced earlier today. We believe this is the first step towards creating an environment in which our clients can harness the full potential and value of our products to simplify planning, buying and measurement of their advertising campaigns.

Third, we generated new demand from both existing clients and new logos. Importantly, much of this new demand was created within our Transit business, accelerating revenues in the segment throughout the year. Most notable of all was our growth in the New York MTA, which was up nearly 20% for the year. And lastly, our teams have responded to our demands for operational excellence by rising to the occasion as illustrated by the fourth-quarter and full year results we are reporting today as well as the strong trends we are seeing thus far in 2026.

Turning to those results. We're pleased to report that we had a solid fourth-quarter. You can see the headline numbers on slide 3. Consolidated revenues were up 4.1%, an acceleration from quarter three of 3.5%, driven by 16% growth in Transit and 1% growth in Billboard, while consolidated OIBDA was up 12% to $174 million and AFFO was up 8% to $130 million.

Slide 4 shows our more detailed revenue results. Billboard revenues were up 0.5% due to higher demand, partially offset by our previously announced exits of two large marginally profitable billboard contracts, one in New York and the other in L.A. as the revenues and expenses of these contracts are still included in our reported 2024 financial statements. Excluding the revenue generated by these contracts in 2024, Billboard revenues would have grown 3.7%. Transit grew an impressive 16%, led by the New York MTA, which was up over 20% during the quarter, driven by strong performances within the finance, tech and legal verticals.

Slide 5 shows our detailed Billboard revenue, which, as I mentioned earlier, was impacted by the two large Billboard contracts we have exited. On a reported basis, static and other billboard revenues were up 1.1% during the quarter and digital billboard revenues were down 0.6%. However, I believe it's important to note that excluding the results of the two large billboard contracts we exited from the comparable prior year period, digital revenues would have been up 6.7%.

Slide 6 shows our detailed Transit revenue, which grew nearly 16% during the quarter. Our digital Transit revenues were up 37% to $73 million, while static transit revenues were down a little over 2%.

The overall strength in our Transit business was driven equally by our commercial and enterprise teams, which both continue to operate at an extremely high level. We are proud of the momentum we have driven within our Transit business in the latter half of 2025, and I'm pleased to report that this strength continues into 2026, which I will discuss later. On a consolidated revenue basis, our stronger categories during the quarter were financial, legal and tech. The weaker categories during the quarter were government, political, retail and auto, consistent with the broader advertising industry trends.

Slide 7 shows our combined digital revenue performance, which grew about 11% in the quarter and represented about 39% of total revenues. Even more impressive, excluding the aforementioned New York and L.A. contracts, digital revenues would have grown by over 16%.

Programmatic and digital direct automated sales were up 11.3% during the period and represented 16.9% of our total digital revenues, up slightly from the same period last year.

Moving on, the breakdown of enterprise and commercial revenues can be seen on slide 8. Commercial grew by almost 7% during the fourth-quarter with Transit growing mid-teens and Billboard up mid-single digits. Enterprise was up 1% year-on-year during the quarter, with mid-teens growth in Transit being offset by a mid-single-digit decline in Billboard revenues due to the impact of the L.A. contract exit.

Slide 9 shows our Billboard yield growth, which was up about 4% year-on-year to nearly $3,300 per month, driven primarily by our inventory management efforts. Summing up, we were pleased that we ended 2025 with strong and accelerating revenues. This positive momentum continues into 2026.

With that, let me now hand it over to Matt to review the rest of our financials.

Thanks, Nick, and good afternoon, everyone. Please turn to slide 10 for a more detailed look at our Billboard expenses. In total, Billboard expenses were down about $3 million or 1.4% year-over-year. Zooming in on lease costs, these expenses were down $4.5 million or about 3.8% year-over-year. This decline includes approximately $9 million related to the large Billboard contracts in New York and Los Angeles that we exited, which was partially offset by contractual escalators on fixed leases.

Excluding the impact of the portfolio exits, Billboard property lease expense would have been up about 4%. Posting, maintenance and other expenses were down about $1 million or 2.6% due primarily to lower production expenses. SG&A expenses increased by about $2.3 million or 3.5% due to a higher provision for doubtful accounts, higher professional fees and higher travel and entertainment expenses. This nearly $3 million improvement in total Billboard expenses, combined with the low single-digit revenue growth Nick described earlier, led to Billboard adjusted OIBDA increasing by over $5 million or 3.4%.

We are pleased to see Billboard adjusted OIBDA margin increase again this time by 120 basis points year-over-year to 41.5%, helped by improved revenue performance and recent portfolio management decisions. We expect Billboard margins will continue to improve in 2026 relative to 2025.

Now turning to Transit on slide 11. In total, Transit expenses are up about $6 million or a little over 6% year-over-year. Transit franchise expenses were up 4.7% due primarily to the annual inflation adjustment to the MAG for the MTA contract. Posting, maintenance and other expenses were up about $0.5 million or 2.8% due primarily to higher production expenses. SG&A expenses were up about $2.6 million or 15%, primarily due to higher professional fees.

The 6% increase in total transit expenses, combined with the nearly 16% Transit revenue growth described earlier, led to Transit adjusted OIBDA improving by more than 56% during the quarter to over $34 million.

While on Transit, I'd like to take a moment to update some of our expectations for the New York MTA in 2026. Our minimum annual payments to the MTA will step up by about 3% this year to approximately $161 million given the New York City CPI escalator contained within the contract.

Included in this $161 million is the final $11.7 million deferred minimum annual payment we will make to the MTA related to the 2020 MTA amendment during the pandemic and the associated MAG shortfall. Lastly, we will continue to account for our New York MTA franchise expense on a straight-line basis throughout the year.

Slide 12 shows the company's combined Billboard, Transit and Corporate adjusted OIBDA in the fourth-quarter. Corporate expense declined by about $1 million due primarily to lower compensation-related expenses, partially offset by the impact of market fluctuations on an unfunded equity-linked retirement plan offered by the company to certain employees.

Combined with the Billboard and Transit OIBDA I covered earlier, adjusted OIBDA totaled about $173 million, up 12% compared to last year. As in the third quarter, much of this increase is attributable to our improved performance within the New York MTA as incremental revenue growth within this important franchise has extremely high margin.

Turning to capital expenditures on slide 13. Q4 CapEx spend was about $25 million, including about $11 million of maintenance spend. We converted 26 new boards to digital in Q4 2025, bringing our total for the year to 103. For 2026, we expect to spend approximately $90 million of CapEx in line with our growing revenues and with much of the spend earmarked for digital development. We still expect $30 million to $35 million of this total to be for maintenance.

One quick note before turning to AFFO. Starting at the end of 2025, we modified our calculation of AFFO to include amortization of direct lease acquisition costs instead of cash paid for direct lease acquisition costs as we believe that this calculation of AFFO is a more appropriate measure of performance period-over-period and consistent with how we calculate funds from operations. This change has resulted in small adjustments less than $3 million on an annual basis for our reported AFFO in prior periods, which have been recast to conform to this definition and can be found on Slide 20 in the appendix of our earnings presentation.

Now turning to slide 14. You can see the bridge to our Q4 AFFO of $130 million. The 8.3% improvement is principally driven by higher Billboard and Transit OIBDA, which was partially offset by higher maintenance CapEx. For 2026, we currently expect reported consolidated AFFO growth comfortably in the double-digit range, driven principally by improvements in OIBDA. Included in this guidance is $145 million of cash interest, the aforementioned $30 million to $35 million of maintenance CapEx and $5 million of cash taxes.

Please turn to slide 16 for an update on our balance sheet. Committed liquidity is nearly $750 million, including almost $100 million of cash, about $500 million available by our revolver and $150 million available by our accounts receivable securitization facility. As of December 31, our total net leverage was 4.7 times within our 4 times to 5 times target range. We remain comfortable with our debt stack with our next maturity not until late 2027.

Turning to our dividend. We announced today that our Board of Directors maintained the $0.30 cash dividend payable on March 31 to shareholders of record at the close of business on March 6. We spent approximately $3 million on acquisitions during the quarter, bringing our total for 2025 to just over $13 million. We remain interested in pursuing attractive tuck-in acquisitions within our footprint. And based on our current acquisition pipeline, we expect our 2026 Billboard acquisition activity to remain at a similar level to those seen in the last couple of years.

With that, let me turn the call back to Nick.

Thank you, Matt. As I mentioned earlier, the strong top line trends we saw in the fourth-quarter continue into the start of 2026. And from where we sit today, we expect first quarter revenue growth to accelerate from quarter four's results. The consolidated reported revenues up in the high single digits, driven by high teens growth in Transit and mid-single-digit growth in Billboard. This guidance is impacted by two nonrecurring items.

First, a Billboard condemnation that will contribute approximately $10 million to Billboard revenues, which we expect to close at the end of March; and second, the headwind created by our strategic decision to exit a marginally profitable billboard contract in L.A., which contributed approximately $4.5 million in revenue in the first quarter of 2025. Taking into account these two items, we believe quarter one consolidated revenue growth would be in the mid- to high single-digit range based on our existing operations.

Before closing, I'd like to take a moment to reflect on three statements I made on our earnings call at this time last year. First, I described OUTFRONT as a differentiated organization that is distinct from the pack and has significant potential to unlock. Second, I said I was focused on amplifying the power of out-of-home and expanding our share of US ad spend. And third, that we would be accelerating our digital capabilities.

Looking back on these statements today, I'm pleased with the progress we have made on all counts. First, as I mentioned on the top of the call, we've begun unlocking the potential we identified a year ago by making significant headway on our strategic imperatives of optimizing our sales strategy, modernizing our workflow and processes, generating new demand and demanding excellence from our teams.

Second, we are redefining the value of out-of-home, which has been historically undervalued by increasing involvement with a variety of different advertising groups, industry associations and conferences to inspire today's marketers on the power and unique value of IRL advertising and how it can drive superior business outcomes, especially during this time of AI-driven mistrust of the online advertising world. We are increasing the visibility of OUTFRONT and the whole industry so that we will be at the forefront of marketers' minds as they design their future advertising campaigns, priming us to take a larger share of their omnichannel spend.

And third, we've accelerated our digital capabilities by signing two new commercial agreements, one with Amazon Web Services, which will primarily serve the enterprise marketplace by connecting our inventory more efficiently into the HoldCo's media buying centers. And second, with AdQuick, an all-in-one AI-powered technology platform that makes out-of-home advertising easier to plan, purchase and measure, enabling a significantly more efficient buying process for all of our customers.

By layering proprietary data and automation, AdQuick allows marketers to launch targeted, measurable out-of-home campaigns in minutes, not weeks, thereby unlocking potential new ad spend from those who found the medium too complex to purchase in the past. While it will take some time for each of these initiatives to fully ramp, we've already signed up clients to both. Most importantly, these partnerships represent the first real steps to modernizing the out-of-home planning and buying process for brands and agencies alike.

To close, I want to stress that we are far from finished. OUTFRONT's journey of growth and innovation from a legacy out-of-home company to a cutting-edge in real-life marketing powerhouse has just begun. While we are encouraged by our results thus far, we're even more excited by the future ahead of us.

And with that, operator, let's open up the lines for questions.

(Operator Instructions)

Daniel Osley, Wells Fargo.

Just looking at the growth that you continue to put up at the Enterprise and National segment, are you starting to see a structural shift in the way large advertisers are engaging? And how do the measurement announcements with AdQuick and AWS tie in here?

Daniel, I think -- well, first of all, thank you for the question. I mean these are both significant strategic agreements that we've set into that are entirely designed to unlocking the new revenue streams that we see both on the enterprise and the commercial side. The orientation of our partnership with AWS is to what we're calling agency-connect to ensure that for all the HoldCos who are increasingly having consolidated AI-enabled digital planning and buying systems that we -- our inventory and our data sets are completely integrated into that.

We see AdQuick as being much more for the SMB and mid-market because as we talked about a year ago when we talked about setting up the strategy to be much more focused on how we would look at SMB, mid-market, and we would look at enterprise accounts as being strategic and those enterprise players. So we're very excited about these initiatives that we've taken. These are established both AWS, of course, and AdQuick have been established in this space and working in a very diligent format. So we're very excited about what they represent.

Cameron McVeigh, Morgan Stanley.

I wanted to ask about your pacings on Transit so far, maybe your visibility into the rest of the year. Curious if this might be the year we see MTA results above the MAG? And then secondly, I noticed an AI-related billboard slide on your earnings deck. I was curious how much of an impact on growth the AI vertical is driving?

Ken, it's Matt. Thanks for the question. I'll take the pacing question on Transit. Transit books relatively later than Billboard. So while we while we feel great about the year, Nick talked about the outlook for the first quarter.

It might be premature to give you any color on the second, third and fourth-quarter, but we still feel it's in great shape, really led by the MTA and your comment of maybe the MTA gets back above the MAG, as you see when we talk about our accounting, we're still accounting for it on a straight-line basis. So we don't anticipate that, but we don't think it's so far out of the realm that it's certainly possible, and we're hoping that we would trip that line.

Cameron, if I take the second part of your question about the AI campaigns, yes, they're significant. If I look at the visibility within the transit world, I think about AI and SaaS, let's say, the B2B sector, we've got some exciting brand names there. We've got a big campaign which was not announced yet. It's just come through. But we've got Anthropic, CodeRabbit, Profound, CrowdView, IBM, ClickUp.

We've got a lot of the independent AI brands that are striving to ensure that they get that level of visibility, both to customers and clients as well as their funding. So we're very bullish on it. We've got a dedicated team led by a leadership crew in San Francisco who are having direct engagement with some of the biggest conversations there. And it seems that our medium is something that they're really understanding that as virtual and digital brands, they can be building their businesses and their recognition in real life. So we continue to see 2026 as this has been a strong category for us.

Jonnathan Navarrete, TD Cowen.

My question is with two months already into the year, can you maybe talk about how national is trending perhaps in the first quarter and then what you guys have seen in the second half? And lastly, can you help us quantify the benefit that the World Cup -- that you guys will have from the World Cup this year?

Okay. I think -- well, thank you, Jonnathan. Thank you for the question. I think national -- when we're talking about national, as I said, we tend to now focus on our categorization between enterprise and commercial. So these enterprise brands and national advertisers, they continue to be a very important part of our business.

And we've really looked at some very strong brand names that continue to support us. I think as we just talked about earlier on the AI and the SaaS side, I mean, some of the big enterprise players on the enterprise side of entertainment, when we think about all the big entertainment brands have been active in beauty, we've had L'Oreal, that's a significant advertiser, Cap One in finance, DoorDash, eBay, even Duolingo, who did a very significant campaign with us that was going to surround the Super Bowl and Bad Bunny performance.

So again, the enterprise team is combined of those who focus on the enterprise clients that are buying through agencies as well as business-direct and brand-direct conversations with our brand solutions team. And those are going extremely well. And then when we think about FIFA, yes, we think of the World Cup, we're excited. It has been identified before, it's a tailwind. We're not yet giving out detailed numbers, but we have direct agreements that we've made with six of our host committee partnerships, so six cities; L.A., San Francisco, Atlanta, Dallas, Kansas City and Miami.

And our level of enterprise revenue that's coming across from some of the significant brands is something we're tracking on a weekly basis. I mean, we have identified every one of the FIFA priority access sponsors, the obvious ones we think about Coca-Cola, AB InBev, Unilever, Verizon, Telemundo, Lenovo, Lowe's, I mean, McDonald's, some of the biggest brands we know, and we're having conversations with every single one on a very frequent basis.

And whether that's specials, whether that's going to be more standard inventory that we have as well as some of the specific city agreements that we have to create unique advertising opportunity during the course of the festival. So we are going to be giving more detail on that on our second earnings -- on our next earnings call. But at this stage, we're feeling very -- we're excited about what FIFA and the World Cup represents.

Patrick Sholl, Barrington Research.

I just had maybe a follow-up on CapEx beyond the maintenance CapEx guidance, the digital elements. Is there any like -- is that primarily digital boards? Or is there -- are there other digital investments that would be included in that?

Thanks, Pat. It's Matt. So the CapEx, we try to keep it around 5% of our revenue, a little lower. With revenue growing, we felt we can take it from $85 million to $90 million this year. Maintenance CapEx will be about the same as last year.

So the increase will be all in growth and primarily for digital conversions and new digital boards. There's an occasional replacement of a board that drives revenue growth. And then we have some spend in some Transit areas, we have residual contractual obligations. But most of the growth is really driving digital billboards.

Okay. And then maybe just a follow-up on the AI and other tech ad spending commentary. Advertisers like Anthropic and other prediction markets, is that group within tech? Or do you -- or is that kind of viewed similar to like, I think, gambling a few years ago when that was ramping up in certain states? And I guess do you kind of see that as -- is that not really meaningful? Or do you see that as like kind of different and potentially more sustainable?

Pat, I think we group all of those within tech, but you point out a good point. A lot of interesting categories within tech. Uber, for example, is obviously a tech company, but it's also travel and transportation. But AI right now, I think we cover it in tech.

Okay. And then lastly, just the MTA, is there any sort of like comp issue from the transition from MetroCard with like government advertising around that? Or is that all like informational board stuff?

Can you repeat that? I don't think we have any comp issues at all. I mean, MTA is doing great. It had a strong second half of the year. It grew all through 2025, as Nick pointed out, rolling into the first quarter with (technical difficulty) Transit has growth for us, it's mostly coming from the MTA. And I'm not sure if I answered the question entirely.

Yes. No, just the transition from like the MetroCard to the One Metro New York.

No issues for us. Ridership continues to slowly melt higher. However, people are getting on the subway. Persons may use credit cards, some people will use their phone, MetroCards are dead, but I think ridership is around 80%, low 80% of where it was in 2019, slightly higher, and I don't think the MetroCard change is impacting that at all.

They did some of it wasn't significant one-off. They use their own medium for that. But if we look at the ridership, it's up 30% from 2022. I mean the range is, as Matt said, between 80% and 85%. But we grew substantially in '25.

We had over 1.3 billion trips in total. So we continue to be excited. And as importantly, that dedicated Transit velocity team have been excellent on focusing not just on the advertising, but on the relationship with the MTA about the opportunities that they see to encourage more creativity and more innovation on their platform and on their rolling stock, it gives us the opportunity to continue to push the envelope with the advertisers who really want to stand out beyond doing a classic ad. So we continue to be very excited about MTA.

Alexey Philippov , JPMorgan.

Can you talk about New York MTA contract again? What revenues do you expect for 2026? So your 20% full year growth that you disclosed, I think, implies around mid-20s growth for fourth-quarter. Can you talk what is driving this strong momentum again? And the second question would be on AFFO outlook for this year. Obviously, World Cup and strong momentum in New York MTA are two big tailwinds. Perhaps you could help understand between these two factors, what is more important for you to execute in order to achieve the double-digit growth in AFFO?

I'll take the AFFO question first. Obviously, we feel very comfortable with I think the phrase we used with that. There's a few onetime things in 2026. As someone mentioned earlier, the World Cup is going to benefit us. There is an election year, which -- we're not a big political player, but it's going to be helpful.

As Nick mentioned, we have a sizable condemnation that's going to hit the end of the first quarter. And then just continued strong growth in our regular way business. Transit continues to rally and highlight and Billboard is doing a lot of new initiatives, lot of things are panning out.

We feel very bullish about our year. So I think the way we give guidance for AFFO, we think that's helpful. We give the details between AFFO and then EBITDA. And I think that's -- you can back into the EBITDA number and then make some assumptions around margins that fund a revenue number.

We typically don't give full year revenue guidance at this time, that's not something we want to put out there in public, but we're happy to help you with your assumptions at a different time.

Yes. And then, (technical difficulty) you had the question about the New York, the MTA contract. I think as Matt shared in our comments that we will see the MTA step up 3% to approximately $161 million this year. I'm not sure I understood what the rest of the question was.

Just more broadly about what is driving revenue growth?

The revenue growth?

Revenue growthm yes.

Revenue growth, MTA, again, we haven't given that guidance, but we feel very confident you can see the acceleration from the first quarter of '25 through, as Nick described, into 2026. As Cam pointed out before, there is a chance, not in our guidance, but there is a chance that we clear the MEG breakeven, which is around $285 million. That would imply very strong double-digit revenue growth for the MTA, but that's, again, not where we're guiding. We're just saying there's a chance of that.

At this time, there are no registered questions waiting.

(Operator Instructions)

There are no registered questions waiting at this time. I'll now pass the call back over to Nicolas for any further closing remarks.

Well, thank you. We appreciate everyone dialing in today and to listen to our prepared remarks and also to our questions. We're certainly -- we're very excited, and we know that we're going to see and meet many of you at various conferences and events over the coming weeks and months. But for those that we don't, we wish you well, and we look forward to presenting our quarter one results to you in May. So thank you so much for joining us. And yes, best wishes.

Thank you all. At this time, this will now conclude today's conference call. We hope you have an amazing rest of your day, and you may now disconnect your lines.