OUTFRONT Media (OUT) Presents at Goldman Sachs Communacopia Conference (Transcript)

| About: Outfront Media, (OUT)

OUTFRONT Media Inc. (NYSE:OUT)

Goldman Sachs Communacopia Conference Call

September 13, 2017 01:15 PM ET

Executives

Jeremy Male - CEO

Analysts

Drew Borst - Goldman Sachs

Drew Borst

I think we'll get started with our next session. I'm pleased to welcome on stage, Jeremy Male, the CEO of OUTFRONT Media. Jeremy has been CEO since September of 2013, so four-year anniversary I guess, that would be four-year anniversary. Prior to joining OUTFRONT, Jeremy spent 13 years as the CEO of the UK, Northern Europe and Australia division within JCDecaux. Thank you very much for being here Jeremy.

Jeremy Male

Thank you, Drew. Good to be here.

Question-and-Answer Session

Q - Drew Borst

So, since the separation from CBS in 2014, it's been a busy three years for you. You've rebranded the company to OUTFRONT Media, completed the REIT conversion, restructured the sales operation, bolstered the U.S. footprint with the acquisition of Van Wagner and you've also divested some noncore businesses including Latin America. With all that accomplished, what are you looking to do sort of as you go forward, what are your strategic and operational priorities?

Jeremy Male

Thanks, Drew, and good afternoon, everyone. Maybe just one quick word and some of the forward looking statements. We have a Safe Harbor statement on our website, just to refer you to that.

So, yes, it has been a busy time over the last four years. I think we’ve achieved quite a lot. As we look forward from here, from my point of view, I don’t think too much has changed in terms of a strategic direction. We remain very focused on getting some incremental growth in our EBITDA. I think we're going to get that through continuing to focus on yield overlaying. And I am sure we'll get into some of these things later. But, overlaying data and insight that I think that will make our medium more attractive to advertisers of today. So, it will be yield, if you like, through technology; it will be yield through new product development. We’ve launched out from OUTFRONT Mobile. We’ve done a vast number of campaigns now where we integrate our media with mobile, and I think that could be an important driver in the future.

We will continue to digitize. We know that we can make the attractive IRIs IRLs through digitization. So that will be a continued focus, and we will continue to look at selective M&A. So, from that point of view, I think most of those things that have been a focus in the past, and I think will continue with this strategic focus as we go forward.

Drew Borst

Thank you. I guess, let’s get the obligatory New York MTA question out of the way. I guess, the decision, as you said on the last earnings call, is expected on September 25th, at the MTA board meeting. Can you talk about -- is anything changed I guess firstly in that expectation? And then, you can speak briefly about what your confidence level is in terms of retaining the contract.

Jeremy Male

So, nothing has changed in terms of timing, as far as we know. It’s fair to say that timing has changed a lot over the last few years; our overlaying has been since we’ve been involved in this process. But as we understand it right now, that’s still -- we believe their decision or decision of committee would be rectified at that board meeting, that’s 25th. Step back from that a bit, I think there is an agenda that’s public. I'm not certain whether -- how granular the information be on that agenda. But, we certainly, within the next couple of weeks from where we are today, we would expect the decision.

It feels like the wrong time to be talking about confidence or otherwise when the decision is just like literally a few days away. All I can say is that we think we’ve put in a very attractive bid. And we’re very excited that the opportunity that if we’re fortunate enough to be selected that that contract will afford us.

I talked earlier about digitization and the fact that -- if you look to other markets around the world now, you’ve got -- in the second quarter, in the UK, it was interesting to see that 46% of our all out-of-home revenues in the UK are now digital; that’s 2.5 times effectively what it is in the U.S. So, we’ve got an awful long way to go. And projects like the MTA will be very key piece of that, because, I’ve said before and there is no secret that a significant part of the MTA bid is about digitizing what is currently an analog landscape, certainly from a media point of view but also sharply enhancing their ability to communicate with their passengers through technology, essentially through our digital screen. So, I'm very excited at what a window of that big could do for the business, if we’re fortunate enough to be selected.

Drew Borst

So, aside from the MTA, OUTFRONT has done a great job adding new transit contracts to the portfolio and was notably the Boston contract earlier this year. Maybe you could talk about, how does that you secure that contract and discuss sort of the pipeline of opportunities that you see for adding incremental transit contracts over the next couple of years?

Jeremy Male

Sure. I'm going to talk about Boston in one second. So, I mean, for the most part, actually the last year has been about defense. And if you think about it, because we've had this huge MTA contract to renew at the moment, LA, which is obviously much, much more franchises, up for bid. We got small billboard piece of the MTA that’s up for bid. Whereas when we look forward, yes, it’s certainly about offers. We can get all these buttoned down over the coming weeks. Next year, San Francisco, BART comes up, Bay Area Rapid Transit. The year after the CTA in Chicago, which we think a bit -- a significant opportunity. So, get 2017 behind us, and I really think it was then on offence.

As to Boston, yes, it was a great win. A significant part of the reason for that win, we’re told and at the time of obviously, we could tell from the bid, was actually about our tech piece, which is -- you will remember that two or three years ago, we invested in acquiring some technology in-house and that is now proving itself. I believe that the Boston win -- I hope that it’s part of an MTA renewal. And I think that we've got a good mousetrap; we’ve got a good mousetrap, but I hope things will appeal to other transport authorities.

Drew Borst

Let’s talk a little about the broader out-of-home market in the U.S. and sort of what the recent trends have been. It’s clearly been a bit of auction year for the industry overall, growth is about 1%; historically, it’s been more of a 3%, 4% growing industry. You look at the macroeconomic indicators, they are reasonably helping, not overly robust but sort of stable. Can you talk about your confidence level in terms of like whether this is just a sort of a speed bump, a pothole, what have you, or sort of a little bit of all or is this potentially more of a secular shift where out-of-home is may be falling out of favor with ad buyers?

Jeremy Male

I think to answer that question, Drew, I mean, you have to take a little bit of a step back in time. And if you look at out-of-home on a worldwide basis, based at least from -- since really digital became part of the media environment in any real sense, which was kind of like probably 3, 4, 5, I mean that sort of time. We then went through the global financial crisis, we came out the other side, all the way through out-of-home, maintained those slightly increased share dependent on the market. And if you like, I’d say out-of-home has maintained share in the light of effectively now half of all of our market being digital in some way or other.

So, I'm a fundamental believer that we’ve actually -- that we’ve weathered the storm. I think, when you look at the ad market this year, I think it’s far more granular, I think it’s far more about some individual allocation decisions by certain larger clients that skewed the numbers a bit. I mean, our ad business sales are national revenues without high single digits in Q1, mid single digits Q2 and we pointed to an improving trend and hopefully we will see that in Q3.

But, when you get into it, as I say, its’ actually about relatively small number of advertisers, I don’t think it’s about the secular shift. I actually believe that what we were talking about earlier on, which is actually overlaying a much more digital approach to our media, not just in terms of physical hardware but in terms of how we sell it, the data we provide on it, how we then sort of -- how we transact it and then how we transmit it, I think will all be positive for the media and that will as a minimum ensure that it maintains its shares as we go forward.

When you look at who is buying out-of-home, so where we're this year. Tech is our strongest category. Who’s our largest advertiser? Apple. What are clients spending increasing dollars with us over the last 12 months, with the Google and the Facebook. Where did Snapchat go when they wanted to have a great statement ad for their IPO? It was our sign in Times Square. So, everything that out-of-home and has done -- out-of-home has done so well for years and years and years, okay, which is connecting billboards with mass audiences, hasn’t changed. We’re never going to be that one to one medium. But, I think we can be a data and insight infused medium on a one to many basis where -- which is all about location. And as we go forward, I think media is increasingly going to be about, as one of the publicists guys said, it’s going to be about, much about where you're, who you are. And we're all about the where you are. So, it’s a bit of a long answer probably. But, in terms of, is this is secular trend? Really don’t think so.

Drew Borst

Yes. Thank you. You touched upon this in your response, but there has been kind of a bifurcation in the national versus the local where national has been declining mid to high single digits and your local business has been growing nicely due in part to the Boston contract but even beyond it’s still [ph] growing. Maybe you could talk about what you're seeing, sort of what’s causing that divergence in growth?

Jeremy Male

So, you’re right. Outside of Boston, we still have great growth I think in our local business this year. I think there is two reasons for that. I think one reason is that actually for the most part, we know that obviously there is some pressure retail, but for the most part, main street [ph] hasn't been going too badly. We’ve put an awful lot of work into improving our sales operations. And so, we have a big sales force, 350, 400 people; we have 40 local offices across the U.S. and we put a lot of work into how we recruit, how we train and how we motivate and how we compensate. So, that's I think a result of that.

And there is one other thing that I think is important to say in fairness and that is that when we look at the signage, if we haven’t sold something to the national advertiser, there is, if you look it, the margin, there is the possibility that there is more available to sell locally in the market. Now, quite a lot -- so that actually there is sort of shift. They have more inventory to sell than they would have otherwise have sold. So, that is also part of it, to be completely clear.

Drew Borst

I don't know if there is anything you’d care to comment in terms of like what you're seeing in the current market. But, I know, I ask that question knowing you generally have a policy of not doing that but I figured I’d ask anyway.

Jeremy Male

Thanks for asking anyway.

Drew Borst

That's my job.

Jeremy Male

Yes, absolutely. So, we've obviously guided on Q3, no change today on that; so, sort of business as usual. And no, we don’t -- I don't want to give any further comment on Q4 right now.

I think what -- we would probably cover it otherwise. But, when we just -- we're just talking about today and trading and things that might be an appropriate time just to mention weather impact, because that's important. So, as we look around, we were very fortunate in Texas and Huston. We only lost one boat [ph], which is -- we hurricane proofed a number of boards in the early 2000s, which has obviously helped significantly. In Florida, as I sort of came in, we were around 35 boards down, we still haven't got all the way down to keys, [ph] so there will be more boards down there. But it's going to be I would guess somewhere between 35 and 100, something like that. So, the total capital cost of 100 or might even be outside, I would guess. So, the total capital cost associated with that, we don't think is going to be much more 1 million and 1.5 million, so, relatively small in the overall scheme of things. So that's one piece of it.

The second piece is that one of the reasons that we have so few boards down out of the thousands of boards we have in the region, is that we take down the copy, so that it doesn’t form a windbreak. So, we take down all the copy before on the exposed board and then we put it back up once the hurricane has passed through. Now, what that is, is it’s downtime from an advertising point of view. So, we lose some display time there between the up and the down. We still can't get out in certain of the places to put all the copy back up. So that's a little bit unclear of the impact there, but I would guess, it's maybe a couple of million dollars of revenue, something like that we may be exposed to.

And then, the third piece is just what happens in those markets, like from here in terms of when do they bounce? I mean, you can imagine that you're going to have some different advertisers wanting to advertise in Houston in the next three months. And if we think about it, all sorts of thing, [ph] could be used, the kind of home improvements and this, and builders [ph] and solicitors and legals and blah, blah, blah, whereas [ph] you probably -- you might not get one of the big cruise companies advertising in Miami for a while. So, we think we will see some shifts. I think on balance, it seems that these events aren’t necessarily bout for media but I think it will may take -- that will take a little while for it to shake out. But that’s harder to quantify. But I think I -- I hope to be pretty much on the money with regards to the other two numbers I gave you.

Drew Borst

And I guess, you disclosed that Huston is about 3% of the overall revenue for the group. And you haven’t -- like how much is…

Jeremy Male

If you put together all of that, all of the kind of hurricane hit sort of area, I mean, when I say that, I mean not [ph] -- there was real impact, something like 9 to 10% of revenue, something like that.

Drew Borst

Thank you for that. I was wondering if you could talk a little bit about, again broader ad transits in your book. What sort of trends are you seeing amongst the verticals? I think, on the last earnings call, you talked about auto and being weak, and auto is probably somewhat self explanatory in terms of what's going out at SAR, [ph] but telecom is another category where you’ve seen a little bit of weakness; that is different than what we're hearing from one of your peers, Lamar. They seem to be having strength. But, I don’t know, maybe just speak generally about, which verticals are sort of showing strength which are not, I mean is there anything sort of to be ready into that for the longer term?

Jeremy Male

I think actually telecom is a great example of why. I think it can be a little potentially misleading to look at out-of-home national and draw too many conclusions in terms of verticals. Because if you think about the top 200 advertisers, they’re spending a couple of percent of their dollars out-of-home time. So, it’s relatively -- you're talking about relatively small piece of that. And Lamar is the great example of where just because of one particular advertiser’s desire to build presence in, generally some of the smaller markets, you’ve got it, it’s been an up category for Sean and a down category for us, because actually some of our key markets that were used by a particular telecom company last year, Miami is one, [ph] actually wasn’t on the schedule this year. So, you can get one decision, by one carrier in one market and it can have that kind of thing.

Yes, in general, auto has been down for this year. Part of that was GM and Chevy spent a lot of money with us in the first part of last year, that didn’t repeat this year. So, once again, part of it was just on sort of more one client driven. Beer, beers [ph] are down for us this year. On the upside is -- as I said, tech is, our fastest growing category and that’s very positive. Entertainment has been strong for us this year. And for us, health and pharma has been strong this year. So, that’s what's going on. I would just caution really -- trying to draw a straight line and saying that this is a trend because you can get these new offices [ph] just between the two main players.

Drew Borst

Okay. In the case of your book of business and you're concentrated in New York and Los Angeles, it's little bit north of a third of your total revenue. And I guess, I wonder if you're seeing any diversion trends between kind of these two big urban markets versus sort of some of the smaller markets, recognizing you're in pretty big markets overall, you're concentrated in top-20, top-25, but is there anything sort of interesting going on in terms of the geographic trend?

Jeremy Male

You're right. Around 35% of our total revenues are between New York and LA. And it's fair to say that national money tends to be directed towards the larger markets. So, we find that to be the case. So, I mean, just looking between those two markets, actually the West Coast for us has been -- has really been pretty good for us for the last two or three years. We've seen some great advertisers come in like Netflix and Hulu and others that have been part of that. While those advertisers also supported in New York, we found that -- we noticed the missing national advertising dollars more in New York than we have on the West Coast. Outside of that, we're in sort of around 58 markets. And so, in the mid-30s of those are up, and then you have the balance [indiscernible] very much. But anytime, it's like a basket of -- it's like a basket of performances that contribute to the whole number.

Drew Borst

Yes. I presume sort of the various is high generally reflects the local economy or what may be happening in those regions, is that kind of the correlation you see?

Jeremy Male

Yes, some of it can be. Yes, part of it can be that; some of it can be -- you may have had, could be as simple as you’ve had some one particular big advertiser; maybe this falls out that’s difficult to replace than in one. [Ph] You may have a market that's $5 million a year, you have a $0.5 million advertiser fall out for whatever reason, be a national advertiser or local advertiser. And sometimes, they take a while to replace, so that could be part of it. Some of it could be personnel change, some of it could be more granular than that.

Drew Borst

When you talk about the business, you guys are very focused on managing the yield; and years passed, investors have sort of gotten used to hearing statistics about sort of rate and occupancy. But, I think all the players have kind of shifted their focus to yield management. Can you talk about sort of that shift in sort of philosophy or maybe wasn't a shift for you, but can you talk about why you're so focused on yield rather than sort rate and occupancy?

Jeremy Male

Because ultimately, the multiple of rate -- five times occupancy is effectively the number worth concentrating on. I don't want one of my -- if you have 20% of our boards for example, we sell on a permanent basis, annual basis and a large number of those renew each year with the same advertiser. So, I've got a 100% occupancy. Am I happy? No. Because anything that's important on that board is how much incremental way I can get when I come to renew that board. So, that's why all of that yield rather than all of that occupancy. And we're trying to push that philosophy down into our sales force, so they understand that. So, we're spending more time thinking about the history on the board. So, how often has that board been -- if you got a board that has a rate of 10, and you’ve sold it 6 times on average in the last year, you've made 60 on that -- you've made out of the potential of the 120. So, actually, I might better going up, and I’m better going up and trying to get that board pushed out at 7, 7.5 and get an annual booking. Just very simple example as to why for us it's important to always think about it. Okay. How can you increase yield and we're trying to push sort of yield management tools down to our management and our sales force, so they can start thinking about the world through those eyes rather than -- it has happened to me in 2013when I came over, one of my managers said, it’s great, I'm 100% sold [indiscernible] quite made it.

Drew Borst

How for long are you in that process of sort of deploying those tools? I mean, is it you’re sort of fully out there? There’s obviously an education sort of component I suppose to it and maybe a cultural change in some of your regional offices.

Jeremy Male

When I think of how, some of the other platforms I interact with in terms of yield management. So, if you think about booking a flight and you go on one, you check it out and there is a rate and you go back -- if you don’t book it then; next time, you go on, it’s have gone up, because the algorithm is saying, hey, there is more demand -- there is more demand for this flight. When I look at how other industries are, we are still extremely far behind. So, we’re not far down -- we are not very far down that continuum. But as you know, we're putting significant investments into our tech stack which will go from start to finish. So, hopefully will be available on other exchanges of our API within ad agency. They will be able to go in, they will be able to put in what audience they want our DMP, which is going to be principally fueled by sell data with other location data and other that all goes into it. You will be able to sort of say, okay, I'm targeting this audience, what are the best boards to buy that, you will be able to go in. And we will be able -- then is available and then at what rate.

By then, as we build our budge, we will know how many people have searched for those boards, how many signs have come up, therefore what could be price of that and then you’ll be able to purchase. And we will have a much more seamless process certainly for our national advertising base as we go forward. Is that going to change the lives of Joe’s Mufflers who wants that board by his outlet just because he wants that board? No, but could it make a big difference to how we start managing yields within our national advertising business? Yes, I think it could. So, as I say, we're on the move but we're not there.

Drew Borst

I think there is this concept like, as your inventory becomes more digital and screen to screen to screen sort of concepts, and I guess, I wonder, are you in these platforms lined against other sort of digital? Can you get your digital inventory next to another, whatever, maybe a phone or a PC or whatever? And can billboards, digital billboards compete in that space and sort of take share from other digital screens?

Jeremy Male

I think I'm absolutely certain they can, but they have to be seen at the time of the allocation decision. So, what’s the different things that I could do, at what CPM, on what screen, and that’s the time to add them, not at the moment, we remain too often a bit of an afterthought, a bit of a while I’ve still got some budget, so let’s allocate it to other. I'm truly convinced. And once we have the ability to -- and I use this word with a small p, programmatically trade media, it means that I’ll be able to trade audiences in real time. So, you'll be able to buy -- the audience at Grand Central that are going to Yankees game on a Tuesday evening between 5 and 7. And as soon as you can do that, so at the moment for the most part, we're sending [ph] out for a month as soon as you buy that 2-hour slot, because you want that audience because for whatever reason, you think of the value add that that has for our industry in general. I think it's huge.

Drew Borst

On the topic of yields, in the most recent quarter, the billboard yields were down in both static and digital. And over the years, the industry has sort of wrestled with sort of how quickly to convert from static to digital. And it's been a concern, if you move too fast, you may cannibalize yourself. And I guess I'm trying to get a sense, when you look at the current environment and these declining yields. I mean, is that an issue currently or is there something else going on that's causing the yields to decline?

Jeremy Male

I mean, from our point of view why yield’s down is because advertising [ph] down. I mean, it was just a demand thing. It's actually far less of our price. When we drill in. And if we do, do the kind of to hold map if you like [indiscernible] occupancy, it's about that occupancy. So, we just -- there is just not enough demand out there. The people that buy -- quite happy to buy at the right -- were proposing for the most part. Obviously at the margins, rate is always an issue in a market where there is low demand.

So, when I think about yields in the future, and when I think about digital, whenever we look at the digital opportunity and now -- rather than talking about digital, if you like within transit systems and talking about the classic digital billboard. We certainly consider what impact that board may have on our static boards in the same area and the same vicinity on the same route, whatever it [ph]might be, because we just have to be aware every time we build the digital board in whenever it happens. It doesn’t necessarily increase advertisers’ budgets in the town. They draw in some new money but it may also take other money. So, we manage that very carefully. We’re still achieving roundabout 100 conversions a year. We're still making a roundabout 4X in terms of incremental revenues on those digital boards. And we're still achieving IRRs of around 25%. So, those metrics are still fine.

But if you look back at the industry as a whole, it's fair to say, and this is not just in the U.S. by the way, if you look outside of the U.S. as well. A lot of the industry's growth is about -- it's about digital. And the sort of the analog piece is -- some of it is very clear because if you digitize the MTA advertising platform, you're going to lose analog [ph] revenues and you're going to gain a lot of digital. So, some of it is inherent in the fact that you'll converting analog to digital. And some of it is just I think will be about the fact that digital -- the flexibility that digital will have, will also draw advertising dollars.

What we're trying to also spend a lot of time doing and this is once again fueled by -- fueled essentially by sell data and other is to also what value can we add to our classic analog board; we’re never going to convert it to digital but it’s a great out-of-home location. So, as soon as we know exactly who goes faster, so if you know this, where they leave, where they work , did they turn at McDonald’s where it said left. So, therefore, you're starting to get some ROI, you're starting to get attribution metric, but you can overlay on top of that. What we hope to do is for every billboard we have is really -- it will have an individual personality. So, if you’ve got two businesses, two billboards at the moment, one at an intersection, one facing intersection [ph] and the other facing that way, at the moment because they are both on the same intersection in Brooklyn, so seems to have effectively the same audience characteristics. Actually they are probably very, very different, if you work -- because maybe that route goes to Westchester and this one goes to Queens.

So from that point of view, if we can start getting that granularity and depth of information, I think we can start having value, particularly if that one with -- the competitor, for example list. [Ph] So that’s the route we're going, which is to say, okay, it’s not just about digital, it’s how can we utilize our tech stat to add value to our static inventory, because sort of 1.5%, 2% converted in terms of digital billboards. If we multiply that by 3 in the next three to five years, we’re still in the 5ish percent, I'm still -- 95% of my location is where I'm also concentrating [ph] making sure that we're concentrating on in terms of adding value.

Drew Borst

So, where are you in that -- in terms of that process, does that make a lot of sense in terms in getting that technology, that data and then leveraging it to improve that sort of sales process? I mean, are you a quarter of the way there or what needs to happen…

Jeremy Male

I think it’s been -- as you know, because we typically call it out, it’s been -- we have been allocating dollars to it. We think that it’s a key piece of our future. Our hope that we’re certainly in full test with number of agencies, in the early spring of next year, that sort of timeframe, and in sort of a fuller test, as we go through the year. But, this has been -- this is very much part -- it will be a 2018 sort of event in terms of actually trading media in this way or bid, it might not be across all of our agency interfaces.

Drew Borst

ON Smart is another initiative, is this part and parcel with what you’re just discussing or is it…

Jeremy Male

Yes, we’ve used ON Smart brand to cover a number of, if you like, kind of tech initiatives. So, the tech stack of which the DMP is part of it, we use it to cover the fact that -- to cover something called OUTFRONT Mobile. So, now through ground truth, [ph] we have a white label product whereby we're selling mobile ads typically triggered by a geofence around our board or around our store. We've done whatever it is, in 1,500 mobile campaigns now. So, we're now significant seller of mobile. And in mobile we have huge amount of data to say -- if you see the ad here, and you see it on the billboard, you’re twice as or you’re X more likely to click through the ad on your cellphone if you have it reinforced or you’ve been targeted by a billboard. So, that’s another piece of the initiative. Included within that is our cell leasing -- cell side operation, small cell opportunity where we are now at a stage where we now have 25,000 locations in the hands of the carriers and the IoT companies et cetera. I think that will be an interesting and growing part of our business in the future. We don't talk a lot because we don't want to have numbers put in the forecast. But if it's $1 million or $2 million per day, I think it could be a significant -- much more significant number of dollars five years down the track. When you look the requirements that the carriers and others, they're going to have data.

Drew Borst

Earlier when you were talking about the transit business and the pipeline, you mentioned there are sort of number of opportunities where you are not the incumbents of sort of Greenfield for you. I was wondering if you could speak about how aggressive are you going to pursue those opportunities versus sort of when you think about your REIT structure, not all the transit assets can be included. I mean, is that a limiting factor to bidding for some of those opportunities?

Jeremy Male

When you look at our business actually in terms of our QRS and TRS, actually the TRS, we have a lot of room to grow before that. And although we obviously got taxed on those dollars, actually when you look at the transit business in general, it's a great business. We think it’s the fastest growing or faster growing piece of the out-of-home market on a going forward basis. We want to be in that market. And you can get good return on capital. Depending on, there are many different capital, mobiles and transit, either transit companies pays for it upfront or we pay for it and get a deduction or we take it on, whichever you do it, it’s a great return on capital business. So, we want to be in the transit business for sure.

Drew Borst

And what is that you think that will cause that to be a better or faster growing part of the out-of-home?

Jeremy Male

I think when you -- if you think about the opportunity to digital, particularly I'm talking about indoor environments. You can get full motion, so you all of the ads that you current -- if you went on to your Snapchat feed now and just sort of looked all the ads you’re getting served, none of them have sound, all of them can go straight down [ph] onto that advertising platform whereas you are restricted to non-movement. You have the zoning issues. You might desperately want to put a digital board and you can't do it, we can't but any digital boards up in LA right now. So, there are other taxes that play that will I think slow that down. And I think the other thing that as we look forward, and it's -- this is a -- for debate, but right now, most people believe that urban centers are going to get bigger, the big cities will get bigger. Big cities are all about transit systems. So, I think as you get more eyeballs, you got more people, I think that that will also drive growth at a higher rate, maybe than some of our…

Drew Borst

Yes, because you control that inventory, you can move digital more quickly…

Jeremy Male

It’s moving more quickly, and arguably there may be more eyeballs in the future.

Drew Borst

Yes. I always see if there is any audience question, if not I can -- I have many more.

UnidentifiedAnalyst

When I ride to subway in New York, I see a lot of empty space in ads, I see a lot of things that make it look like there is not robust demand for ads. So, I just wondered if you have any comment, because I just -- what you been saying doesn’t square with what appears to be what I'm seeing, which suggests to me that things are softer than we see.

Jeremy Male

I didn’t catch the last thing, but let’s -- that is fine, let’s take the -- I think I got the nuance [ph] of your question. I think we go back to another question that Drew asked and talked about, okay regionally and geographically generally what have been the really strong markets, and I sort of implies that with the national advertising, it must have been the strongest market. But for the most part, I ride to subway a lot, I take transit every day from Greenwich, Metro North, down and rode the subway here, et etcetera this morning. Look, you do see blank spaces. I don’t think there is any -- there is no network that you don’t. It’s -- if you look at the revenues associated with our subway business this year on a relative basis, there is no alarm there.

Drew Borst

Okay. Maybe I will round things out with maybe a question about your AFFO guidance. In the first half of the year, you were down about 13%; you're guiding for the year to be down slightly, which implies a second half acceleration probably to maybe the low single, maybe high single-digit kind of growth. Maybe you could just sort of numerate what sort of the key drivers of that, I mean is it strictly a top line sort of story?

Jeremy Male

Yes. I mean, aren’t that many moving pieces in AFFO and obviously a key moving piece is OIBDA. And the key driver of that is revenue, for that cash taxes are in there, for the most part, there is somewhat known maintenance CapEx is in there. And maintenance CapEx in the first half of this year was higher year-on-year but, which has been a piece of maintenance -- AFFO so far. So, those are main moving parts. And as of now, we made change to the -- no change to the slightly down guidance that we provided.

Drew Borst

Okay. Well, thank you very much, Jeremy. I appreciate you being here.

Jeremy Male

Thanks, Drew.

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