Ms. Marlene Pereiro. I'm the high-yield cable and media analyst here at Bank of America. I'm pleased to have with us from Clear Channel Outdoor, David Sailer, and Jason Menzel. Thank you so much for being with us today.
Sure. Thanks for having us.
So I wanted to start with advertising trends. You know, what gives you confidence that strong ad trends can continue into 2026? And are there any signals that you're seeing from renewals that you can share with us?
Sure. As we end 2025, and I feel like we're ending on a good note, you know, during our earnings, we mentioned we had 90%. This is back when we did our earnings for the third quarter, early November. We had 90% of our ad sales booked for the fourth quarter, and that's a good number, you know, going in November for the year. I think that's kind of the start as we get into next year, and the bookings and the conversations have been strong. The upfront, which we call the upfront in the out-of-home industry, more on a national scale, is where we have a lot of our large national advertisers doing their placements for the next year.
It starts in September, and that rolls through February, and those conversations have been strong, and they've been positive. You know, on our premium assets, there are definitely rate increases, and when you think about a market or even the business that's more on the America segment, our premium assets, which is a smaller percentage of the overall assets, drive a much larger share of the dollars, so when you're getting that increase in price on those assets, that's a big deal, and it's good momentum as we get into the year.
A nd also, when I think about 2026, you know, FIFA is going to be, you know, obviously a major sporting event in the United States, and the locations of those events match up very well with our assets, both on the airport side and the America segment, in cities like Philly, where we have a large asset base. We have the airports that will be in LA, New York, Atlanta, Miami. So it really molds well with our asset base.
And in addition to that, I think events have become a big component of sales in the U.S. And even conferences like Dreamforce in San Francisco next year. We have the Super Bowl in San Francisco. So as I see it today, and the bookings that we're looking at as we get into 2026 have been strong. The conversations have been strong both on a national and local level. So I feel good as, you know, we're going into 2026 from an ad sales standpoint.
Great. And, you know, how do current price increases compare with prior periods?
Definitely more of a position of strength this year. When I think about where we were last year at this point in time, I think the elections actually had an impact on the first half of last year. The uncertainty of the elections, I think uncertainty, you know, for advertisers, for business, just in general, is never good, and I think the RFP volume that we were seeing coming out of 2024 into 2025 was weaker, and I think that had an impact on the first half of 2025. The fires in LA obviously didn't help, but the year played out very similar in 2025.
As we said, when we were having these conversations last year, the year started off slow, and we expected it to increase throughout the year, and it did. As we are here today and moving into 2026, when you're in more of a position of strength, and the ad sales market, I think, is more robust than it was last year. As I mentioned earlier, in your larger, your premium assets are driving a larger scale of your business.
As you're getting rate increases on those and you're filling up the bucket, your less premium inventory, as the premium inventory is filled up, advertisers, you know, go to those boards as well. That's going to drive occupancy. That's kind of how I see us going into the year. I think we had increases year over year last year, but I think it's a little bit stronger as we go into 2026.
Great. And as we think about specific categories heading into 2026, you know, which do you see as potential leaders and laggards? So, for example, if we think about political, if we think about pharma, if we think about auto, tech, etc.
Sure. I mean, I'll talk political first, and it gets a lot of the conversation. It's not a huge vertical for us. It actually was very strong in 2024. It was helpful. I mean, the presidential elections, we actually got more impact from political spend than we normally do, and, you know, I think we'll get, you know, some share of that spend, but I don't think it'll be a huge driver, but it'll be helpful in 2026, and overall, we've talked about our vertical strategy, and I'd say some of the verticals that are very strong right now that I would expect to continue into next year, the banking and financial services sector has done well, both across America and airports.
Technology driven by AI, specifically in San Francisco, has been very strong, actually stronger than we expected this year. I expect that to continue into next year. It seems like we're even booking dollars into other markets from an AI perspective. Pharma is a vertical that our company has crafted for the at-home industry. You know, five, six years ago, you didn't have pharma advertising, and that really came out of our direct-to-client business, where, you know, we had an individual with the team that really got that skill set, and we had one client.
We had one pharma client four or five years ago, and we, from the RADAR platform, the behavioral attribution of that platform, where we're able to talk about script download scripts that are written both in exposed and unexposed, and we went from one client four or five years ago. Now we're having conversations, you know, with almost a dozen clients as we go into 2026, so I expect that vertical to grow. It's been a very good vertical in 2025, I expect that into 2026. Auto insurance is a vertical that was very strong for us, you know, pre-COVID. And that really went from a very big vertical.
And, you know, that went down, you know, as you progressed through COVID. And that's starting to come back. I think the auto, I think it's a great advertiser. You're in your car. For car insurance, I expect that to come back. It's been very strong this year. I expect that to continue. And we talk about the vertical strategy of pharma. We're looking, and we talked about this, hiring someone within our company to go after auto. That's something we're still, that's a pretty big vertical for us. We want to drive additional growth, you know, the Tier 3 advertising. Something that's very strong from an airport standpoint.
Travel has been very strong for airports, not as strong on the America segment. That's something, you know, that we're going to actively look at next year and, you know, think about campaigns of, you know, come to our city, and that usually was driven through search, and that's something we want to go after within the cities that we're at and driving that type of advertising and to complement what they spend in search, to kind of amplify that, you know, with our product offering for certain cities. So those are probably some of the major ones.
I 'm trying to think of anything else, and there are a few that, you know, haven't performed as well. At the local level, you know, retail and restaurants kind of been up and down throughout the year. The conversation always talks about media and entertainment. Still a large vertical, you know, hasn't grown like we'd like. That's probably more of a product of LA. But you're starting to see media and entertainment starting to book in other cities as, you know, production facilities are moving outside of LA. So that could be helpful, but it's still a vertical that's not growing like we would want.
Great. And then, you know, touching on airports, you know, how impactful will, you know, the new JFK and other terminal openings be in 2026? And obviously, you know, airports have been very strong. So how sustainable is that? And what are really the key drivers of that?
Sure. I mean, the airports business has been great. The team has executed wonderfully across our portfolio of assets. If you walk through an airport several years ago as opposed to today, as we're renewing airports or extending airports, and you put in, you know, you mentioned new terminals in JFK, as you put new assets in, really the strategy has been going with big, impactful signs as opposed to a lot of smaller signs. And the advertisers have really responded to it.
We've done category exclusives in a lot of our airports. If you walk through, I was just out in Detroit, if you go in there, you'll see Michigan all over the place. In the University of Michigan, you'll see it. Rutgers in New Jersey. Those category exclusives, like you're going to pay extra for owning that space. We do it with healthcare within the airports. Just the programs themselves, you know, they're becoming more digital. When we think about JFK, we have the Disney Tunnel. I mean, that's something you go from one terminal to another, where we built that with having conversations with the advertisers, knowing that Disney was going to sponsor that.
So like that's, you know, kind of the Disney Tunnel. So it's a premium buy. The demographics that are flowing through the airports is highly what the advertisers are looking for. It's a great demographic. And the airports are busy. I mean, the traffic is up. As far as, you know, the growth that we've seen, you know, we're not going to have 16%-20% growth in the airports, you know, year into next year. That will come down to a more sustainable level. But I still think that's, you know, mid to high single digits number from an airport standpoint.
Great. And then shifting to digital, you know, what share of revenue do you expect digital represent, let's say by 2028 versus today? And, you know, which markets offer, you know, the most upside for digital penetration?
Sure. I mean, the digital investment is still just a great capital project for us. When we convert a sign, you're going to get in the four to five times uplift in revenue. And that's been tried and true over many years. You know, we watch that very closely, constantly, you know, reviewing year over year, looking at that uplift. Organic builds are great as well. A little, slightly more expensive, but it gives you coverage in an area you're normally not in. As far as growth rates, look, I think there's a lot of runway to continue, you know, investing in digital across both airports and America.
In the America segment, you know, we're roughly 5% or 6% of our assets are digital, but the revenue is 35%-36%. Airports is north of that from a percentage of revenue. We have, being at 36% in the America segment, we have several cities that are plus 50% in revenue: Phoenix, Atlanta. And I do think when you get to that 50% and above, and we saw this in Phoenix, and it's not just us that has boards. Obviously, there's a lot of digital boards in Phoenix. When you start getting to that 50%, it does take the market a little bit of time, you know, to absorb that inventory.
But we saw once that market absorbs that inventory, you really can get scale now. I mean, you can do campaigns across that market, really covering the entire market from a digital standpoint. And I think that is something that's going to be beneficial as you put in more digital boards. But then you have markets, Houston, LA, Philly, that are below 30%. There's room for those markets to grow. That's probably more of a regulation thing within those cities. And you work on those to open up more digital boards. People will say, well, what do you think you can get to?
You know, when we owned our European business, there were some countries that were north of 70. You know, we're at 36 in America. Overall, we're probably about 40 with airports. That will slowly tick up over time, probably, you know, a percentage point or two a year. But they're great investments, you know, actually higher than a 30% return on those boards. And we still have a lot of inventory to continue that playbook. And that's definitely when I think about the Investor Day.
And if folks were at Investor Day, glad you were able to attend. If not, it's definitely online to listen to. But the story that we're talking about on investor day is growing the top line 4-5%, the bottom line 6-8% over that time period, you know, reducing our leverage from where we are today at 10 times leverage to more 7 or 8 times by 2028. You know, that digital program is definitely a large part of that process.
Great. And what, you know, regulatory or other barriers potentially limit digital conversion?
Look, there's some areas where you can't build digitals. You know, Tucson is a market that we have where, you know, we don't have digital signage. And everyone knows, you know, within LA and certain areas of LA, you know, where our digital boards were turned off. You know, on top of that, we definitely have built out a very good, you know, market within LA. Houston's, you know, a city where there isn't digital within the city. If that, you know, jurisdiction, that regulations, we're able to put digital in there, yeah, we would go in and definitely over-index the amount of boards we do in a year for something like that.
But overall, across our portfolio, you know, there is room to run. And if something opened up in a specific city, you know, we would obviously build more. That's definitely an investment for the future. But we did it in Dallas several years ago. I mean, it's probably about 10 years ago where, you know, digital was opened up in the city of Dallas. We moved in, and we probably have today, you know, over 100 digital boards in Dallas.
Great. And how does programmatic fit into your broader digital strategy?
It's another channel that, you know, that we sell across our portfolio. You know, we have our local channel, national, our direct-to-client, programmatic, our inside sales channel. And look, programmatic is another way and another advertiser to go after. When we first started selling programmatic, it definitely was a different budget. It was, you were going after, you know, at the agencies, a different bucket of dollars from an advertising standpoint. And that's still the case.
But there are still some clients that are direct to our business that are moving in from a programmatic standpoint. It's a smaller channel. It's not a giant channel when you think about our $1.5 billion business, but it's growing very fast. And it gives the advertisers an opportunity to come in and out a little bit quicker. You can buy the inventory in and out a little bit quicker, a little bit easier.
Where I see programmatic going for our business is our product called ClearCast Digital, which is really a way of buying impressions, which is, you know, how programmatic is sold, but buying it directly through, you know, our business as opposed to going through the DSPs and the SSPs because, you know, the margins on a programmatic buy is less for us because you are paying the SSPs and the DSPs.
But I feel like that ClearCast Digital is definitely a way where you can efficiently sell your inventory, where a lot of our assets, especially the premium assets, are bought at a more of an on-location type buy, where through ClearCast Digital, you're buying impressions, and we can really optimize our inventory. And that's where you can grow occupancy and margins and whatnot. So it's all a part of, you know, the sales engine, you know, that we spoke about on investor day.
Great. And then, you know, MTA, you know, that contract has done very well, you know, seems to outperform expectations. You know, can that momentum continue?
Absolutely. Look, the MTA, it played out. I mean, we actually beat the plan that we had in place, which was aggressive the first year. It's going to be cash flow positive the first year. And, you know, it has a sizable mag in year one. It's very good inventory. It's premium inventory. You know, we talked about, you know, the U.S. Open during our earnings call, where, you know, we were able to utilize our inventory, MTA and in New York inventory, along with our airports inventory in New York, where you would get folks coming in for that event.
You're getting them going through the airports, you know, driving into the city, around the city, around the venue. That's a huge selling point, you know, to customers. Do I see the MTA continuing to grow? Absolutely. We got that contract where we were awarded that contract on November 1st of 2025. We signed the contract in October. So, you know, the ramp-up on those boards was a little bit slower in the sense that we started selling it in October and you inherited it in November.
So that was really why the margins, you know, had a margin impact on our business because the site lease on day one is the same as the site lease, you know, 10 months later. But now, as I talk about the strength going into 2026, and the MTA is a part of that, now that's part of the process as we're selling our upfronts for the next year. That wasn't there last year. I expect the MTA to continue to have the progress that it's having.
You know, this year, as we get into 2026, we'll start to see the margins improve on the America's business because we have absorbed, you know, the MAG and the site lease of the MTA, but that will continue to grow from a revenue standpoint. And it's a great buy. It's done very well. It's helped the national sales team in 2025 into 2026, but it's also a very good local buy. So it's been very productive for the business. And it's also the type of product. Before we had the MTA, we had an okay inventory in the New York market.
We were probably a little scaled more in New Jersey. But having that MTA, you know, when we have large national RFPs coming through that include New York, it just makes us that much stronger. And if it's a multi-market deal, you know, that helps the business overall. And we spoke about that when we were signing that MTA contract. And that has come played out in reality, which has been great.
Great. And, you know, how will America's margins expand as those MTA costs normalize?
They'll expand year over year. Like, we were down probably half a percentage point from a margin standpoint, maybe a little bit more. You'll start to see that grow back, you know, in the fourth quarter. And we'll see margin expansion on our America's business. And that will continue as you get into the first, second, and third quarter, which definitely would be nice to talk about as opposed to the margins going the other way.
Well, we knew that was going to happen. We told everyone, but there was a reason for it. But at the end of the day, it's also driving margin dollars in addition to the percentages next year. So overall, from a strategic standpoint, the MTA has been a good property for us.
Great. And you mentioned earlier, David, some of the targets you laid out at your investor day. So, you know, 4%-5% revenue CAGR, 6%-8% EBITDA growth through 2028. Also, you know, reaching $200 million AFFO, 7-8 times leverage. You know, on the flip side, you know, what are some risks that could potentially derail that plan and how might you mitigate them?
Sure. I mean, look, overall, I think the plan we laid out on investor day is an aggressive plan. I think it's reasonable. But growing the business 4%-5% on a top line, you know, for the next three years is absolutely attainable. And I think there's a potential to actually overdeliver that plan, you know, if certain things fall into place, you know, in the right way. And we went through that in detail during investor day. But as far as the risks, you know, that happens then, we are an ad sales business. You know, any kind of macro could have an impact on the business.
I think we do have sticky assets in the sense that we talk about us being a location buy. And what we saw even during certain parts of COVID is, you know, folks that have perms. Our business is sold in the sense that on the America's business, probably a little less than half of our business are perms. And what that means is advertisers are buying the full year. It's really a calendar year, but throughout the year, they're re-upping for 12 months. And it's pretty steady throughout the year. It's probably in the high 40s.
Our airports business, you know, their perm business is probably closer to 60%. So when you do have a downturn, there are assets that, you know, folks don't want to, they don't want to abandon that space because they look at it as they own that location. And that helps us, you know, during a downturn. Even when that happens, if someone does drop that board, usually, you know, you'll get a pretty good price increase because someone wants to go after it. But obviously, an economic, you know, impact, you know, would hurt the business.
But where we are today, if we were having this conversation two years ago, I'd have a much different answer. When we owned our international businesses, you know, a downturn, you know, was, I won't say scary, but it was quite impactful. The businesses over there, especially France, like during COVID, burned a lot of cash. Those businesses are much higher MAGs, more from a rev share standpoint, where today we're more of a simplified de-risk business where we can absolutely weather a downturn from a cash standpoint much easier than we could prior.
So I think as a business, we're set up in a much better way. We would utilize the normal triggers as far as you would look at your capital spend, you would look at your expenses and whatnot. We can definitely weather a downturn better today than we could, you know, a year ago or two years ago.
Great. And shifting to the balance sheet and capital structure in particular, you know, how do you think about addressing the 2028 and 2029 unsecured maturities and, you know, kind of what creative options could accelerate that delivering?
Sure, man. I'll bring Jason into the fold, and you know, I can always come on top, but if you want to start.
Yeah, I think, you know, our view of the 2028 maturities are, they're in focus, right? We were able to go to the markets and push out all of the maturities that stood in front of them. So now those are out in 2031 and 2033. So we are solely focused on the unsecured notes. And, you know, we're addressing those as we laid out in the Investor Day through, you know, asset sale proceeds and free cash flow generation. I think, you know, the trading levels of those bonds, while we can't capture discount anymore because I think they're near par at this point.
Y ou know, there's been a kind of a sentiment change to where we feel, at least, and we feel internally for sure, that those are more addressable in kind of the normal way capital markets, especially if we continue to deliver and take those balances down by the time we have to deal with them, which would be sometime likely in 2027 at the latest point, right? But we do get a lot of creative ideas coming through. I mean, everybody has a way to handle those.
And I think if we determine that they are beneficial kind of to the long-term cost of our capital, we take a look at them. But today, as we sit here, I think turning through those with our free cash flow generation and paying them down and monitoring the capital markets from here until that point and taking something, looking at things that are opportunistic has suited us pretty well. But we're not closing our eyes to any creative ideas that are out there.
Great. And, you know, can you remind us what your current secured capacity is? And also, is there an appetite for any ABS financing?
I think secured capacity, you know, I think we've stated this before. We're around $500-600 million of total secured capacity. We do like to reserve some of that capacity for draws and revolvers. Now, we don't anticipate a need for those with our liquidity position today. But that is, it's not enough to say, you know, we get questions, do you have enough secured capacity to take care of the unsecured? And the answer to that question is no today.
And then, you know, as we think through the ABS, you know, that is a type of secured financing. And we obviously take a look at it. But again, using secured capacity, especially on contracts that we have that have really nice cash flows, we just want to make sure that it makes sense over the long term, right? So the cost of that financing, which we've seen historically, has been at the same rates as we would likely see a high-yield offering.
So we definitely monitor it and are taking a look at it. But we would want to make sure that it's efficient to the capital structure in the long term and it doesn't throw anything into the mix that we wouldn't otherwise be able to do in kind of the high-yield markets, which have been very efficient for us.
The REIT topic comes up often. So, you know, what conditions need to be met for a REIT conversion? And realistically, when could something like that occur?
Look, from a REIT standpoint, that's for our vantage point, that's really a tax play. And as of today, like we're not, you know, a material, you know, federal tax-paying entity. That will change over time. It's not happening in the immediate future. But for a REIT, really to make sense, and we can look at some of our counterparts, you probably need your leverage in that five times area for it to make sense. In the short term, you know, from a tax planning standpoint, that's not something that we're looking to do.
But over the long term, as you get, you know, past our, you know, the investor day period, you know, that is a viable option. But to get down, you know, to that 5x leverage ratio, I think through our investor day, I think the 7.8 times is absolutely attainable. If we, you know, overdeliver that plan, you could probably get into the sixes. But if you do that, I think the value you're going to create over that time period, you know, paying down debt, as Jason mentioned earlier, you know, it's probably another $400 million of debt, which obviously you would get that transfer of value from equity, I mean, from debt to equity as you grow the business over that time frame.
And we've talked about this over that LRF period is, you know, probably, you know, 100-115 million of EBITDA. And if you don't even think about it from a multiple expansion, if you look about where we are today, you know, and where we trade, you know, that's probably 1.5-1.6 billion of value from an equity standpoint. And then your stock price is different than where it is today. And maybe you can utilize, you know, that currency to further, you know, deliver the balance sheet. So, you know, the tools and the options that we have available to the business today are so different than where it was two years ago when we were trying to sell our European business.
So, you know, I feel good when you bring up the REIT conversation. Yeah, that is something we could do down the road. You asked me that question a couple of years ago. It would have been harder to imagine. But now that we sold that business, you know, the value that we can create, it kind of opens the doors. And, you know, that could be helpful also from, you know, when Jason talks about, you know, our leverage and our senior notes, you know, come into in 2027. So there's definitely more options on the table for us.
I would just add, I mean, the two roadblocks to REIT conversion were the international assets, which are non-qualifying, and leverage. We've addressed one of them. We're hoping to address the next also.
When we think about M&A, industry consolidation, also asset sales is the other side of that. You know, how are you more holistically thinking about that from an industry perspective, where you could fit into that? And also, what are some of the limitations we should be mindful of specifically from a tax perspective that could hinder some larger transactions that, you know, people might speculate would be beneficial?
Sure. I mean, like from an M&A standpoint, we're very realistic of our capital structure. So, you know, we're not out there going after a large acquisition where we are from a leverage standpoint. But on the flip side, you know, we have talked about, you know, creative solutions. You know, maybe there's a JV structure. We bring in a partner. You know, that's something, you know, that we're absolutely exploring where we would contribute assets, they contribute cash, and then you can go out and purchase something. And obviously, that grows your EBITDA.
That helps you from a leverage standpoint. Look, the industry as a whole, we expected, you know, 2025 probably to be a little more robust from an M&A standpoint. And it wasn't, you know, with the new administration coming in, you know, folks expected more. You're still seeing the, you know, 10 boards being picked off here and there by certain companies. But I think over, you know, the next several years, you'll probably see some larger type transactions. You know, do I know what they are today?
No. But the out-of-home space, you know, the top three are probably 65% of the industry. So there's another 35% of some pretty large, you know, out-of-home companies down to small, you know, ones and twosies. And it's kind of been an out-of-home strategy of doing acquisitions over the time. We did it years ago. Obviously, Lamar does that as well. So we'll see how that plays out. You know, we'll look at smaller acquisitions where it makes sense. But from a more larger scale, that's probably something, you know, we would do from a partner standpoint. But again, you know, that's another tool for us.
But when I think about just what we went through on Investor Day and the roadmap that we laid out, like that strategy of just operating the business, growing EBITDA, we'll be able to, you know, reduce our leverage to that 7-8 times range, which I think is a big deal from where we are today at 10 times. But, you know, that will happen over the next couple of years.
Great. Well, we're out of time. So thank you. Helpful and informative as always.
Thank you.
Thanks for joining us.
Appreciate it.