Outfront Media Inc. (OUT) Q1 2014 Earnings Report, Transcript and Summary

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the CBS Outdoor First Quarter 2014 Earnings Conference Call. [Operator Instructions] Gregory Lundberg, Senior Vice President of Investor Relations, you may begin your conference.

Good morning, everyone. Thank you for joining our 2014 first quarter earnings call. On the call today are Jeremy Male, Chief Executive Officer; and Donald Shassian, Executive Vice President and Chief Financial Officer. After today's prepared remarks, we'll open up the lines for a question-and-answer session. A slide presentation to accompany today's call can be found on the Investors section of our website at cbsoutdoor.com along with the earnings release and an audio webcast of this call. Let me now refer you to Slide #2 of the presentation, which contains our Safe Harbor disclaimer to remind you that this conference call may include forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ. In addition in this call, we'll refer to certain non-GAAP financial measures. Please refer to the appendix of the slide presentation and our earnings release for the reconciliations of non-GAAP financial measures to GAAP, each of which can be found in the Investors section of our website, cbsoutdoor.com. These documents also provide reconciliations of results on a comparable basis, which we believe present a more meaningful view of our business performance and progress by making certain adjustments to our reported 2013 results to exclude a significant net gain on disposition incurred in the first quarter of 2013, to include incremental standalone public company operating costs and interest expense at the same level incurred in the first quarter of 2014 and also to reflect a constant dollar basis. So with that, I will now turn the call over to Jeremy.

Thanks, Greg, and good morning, everyone. We're really excited to be talking to you today as a newly public company. On this call, I'll quickly discuss our performance highlights for the quarter and then provide an overview of our business and the opportunity ahead. Then I'll hand over to Don to go into the results in more detail as well as review our balance sheet and cash flow. After that, I'll come back and conclude with the key strategic drivers we're focusing on to create value. So turning to Slide 4, we're really pleased to have delivered good growth across all key metrics and geographies in the first quarter of 2014. Total revenues increased 4.4% on a constant dollar basis. This was driven by several things, including 4% U.S. revenue growth and 8% international growth led by strong performances from Canada and the Mexico. Billboard revenues, which were up 3%, were driven by a year-over-year improvement in revenue per display, what we call yield; and also from converting static boards to digital; a near 10% lift in Transit revenues with stronger entertainment spending; as well as a new digital display network in New York City. During the IPO roadshow, we talked a lot about how the Transit business is a real differentiator of our business, a real strength for CBSO. Total adjusted OIBDA was up 5.6%, and we will continue to focus on our yield initiatives and cost control to drive improved adjusted OIBDA margins, which were 26.3% for the quarter. We had a good conversion of adjusted OIBDA to adjusted funds from operations, or AFFO, which is an important performance metric for a real estate investment trust. Our AFFO was up 7.4% this quarter. As a REIT, we have to use this cash flow to distribute at least 90% of pretax income as dividends to our shareholders. And we plan to actually pay out 100% of it as dividend. Our Board of Directors has declared a quarterly dividend, payable June 30, which we believe approximates that 90% annual payout. We plan to make the final payment to bring it to 100% early next year. We think this will provide a very attractive yield to our shareholders. We're well down the road on our plans to become a REIT. On April 16, we received a favorable private letter ruling from the IRS with respect to our plan to convert into a REIT. We firmly believe this structure, combined with the attractive growth dynamics for our company and the industry, will create long-term value for our shareholders. So in aggregate, our business is performing well and is progressing according to our plan. Turning to Slide 5. As many of you heard us say during our roadshow presentations, we're very excited about our market positioning and the opportunity ahead. It always has been and still is a great time to be an out-of-home, and I'm especially excited to be in the U.S. market at this stage of the game. Outdoor's share of U.S. advertiser spending at around 4.5% is still well below the 8% spent in other countries, underscoring our long-term growth potential. Let's take a look at 3 great points about our business and the industry. The first key point is that outdoor is increasingly impactful in the media landscape. Our audience is not only growing as the population expands and gravitates towards the cities and suburbs, but advertising dollars are following this urbanization. With our top DMA focus, we think we're best placed to capitalize on this opportunity. As the media landscape evolves, particularly in the light of the growth in online and digital, our business is not seeing the disintermediation that's disrupting so many other business models. Outdoor is always on and increasingly engaging, which brings us to the second point. Technology is a big opportunity for our business. Not only do digital boards give us 4x the revenue of a static board, but our digital network is growing in strategic importance. With TV, the Internet and mobile, we have become the fourth screen for advertisers to reach huge audiences with the click of a button. Outdoor also enhances 2 other important areas of digital marketing: social and search. In social, our mass reach means that we can inspire online discussion and sharing of ads seen on our billboards. Regarding search, the act of seeing a billboard has been shown to drive consumers to learn more about a product by searching for it online. This is particularly important with the trends towards mobile search and the connected consumer out-of-home. Both of these capabilities will be very important for our clients in the future. The third point is the increasing reach and speed with which we can serve our advertisers. Not only do we give them national reach, we do it with local execution, and that execution is increasingly deployed on a very rapid basis. In digital, we can get a campaign up in a matter of minutes. In static, technology and production have improved so much, so that we can get a campaign out in just a couple of days. These factors have really influenced how advertisers buy outdoor, and we've seen a persistent shift over many years towards shorter lead times. Also, when I ran outdoor businesses in Europe, a typical buy might be 2,000 boards for 2 weeks. That's exactly the kind of strategic buying that we want to bring to the U.S: more flexibility, more immediacy and more impact. Now let me drill down into our unique position in the industry, which is summarized on Slide 6. We have a superior real estate portfolio of billboards and transit with a significant presence in top metro markets, once again, precisely where the audience is growing and where advertisers are spending. We believe our active [ph] mix of billboards and transit will continue to drive consistent revenue growth in revenues and cash flows. And we have multiple ways to enhance this growth in the future, including digital deployment, yield management, transit franchises and targeted acquisitions, all of which I'll talk to a little later in this call. I'd also like to add that I'm personally very excited to be working with an extraordinary, experienced team at CBS Outdoor and some exceptional people that we brought on board in many key parts of the organization. And I can tell you that everyone here is extremely energized by our opportunity as a standalone company and our leadership role in the outdoor industry. Combined, this puts us in a great position to outperform and create long-term sustainable value for shareholders. I'd now like to hand the call over to Don Shassian, our Chief Financial Officer, who'll walk you through the financial performance in the quarter in more detail. So Don, over to you.

Thank you, Jeremy, and good morning, everyone. On Slide 8, you can see a little bit more color on our revenue and profitability performance during the quarter. Jeremy mentioned several of the factors that drove our solid 4.4% constant dollar revenue growth. I'd like to add that there has been some industry commentary around first quarter impacts from poor weather and from national advertising dollars shifting to other sectors for events like the Olympics. Despite this, we are pleased that both static and digital billboard revenue per display or yield, as we call it, were up year-over-year on a same-board basis. This focus on the amount of revenue we generate per display also helps us keep our costs in line. On the expense side, while there are some factors that affect comparability from the first quarter of 2013, including the incremental $3.8 million of standalone public company costs, we believe that our current first quarter 2014 expense levels gives you a better run rate view of our underlying business. Combined with our solid revenue growth, adjusted OIBDA was up 5.6%, and our margins expanded to 26.3%. I want to point out that our adjusted OIBDA now excludes stock-based compensation expense to better align our financial reporting with our peers. Turning to our segment results on Slide 9. In the U.S., which is 89% of our total revenues, revenues grew 4%, and adjusted OIBDA increased $1.9 million or 2.4%. This is driven by higher revenues offset by higher site-related and compensation expenses. On Slide 10, our international revenues grew 7.9% on a constant dollar basis in the quarter. Canada and Mexico showed a turnaround, and we are pleased to see the underlying positive performance. International adjusted OIBDA grew 57% to $1.1 million the first quarter, primarily due to the revenue increase, partially offset by higher operating costs associated with the revenue growth. International has clearly improved, and we are pleased with the performance this quarter. Turning to Slide 11. Let me provide an overview of our capital expenditures. In the first quarter of 2014, total capital expenditures were $8.2 million or 2.8% of total revenues. This included $3 million of maintenance CapEx and $5.2 million of growth CapEx. There are 2 things I want to point out about CapEx this quarter. First, as you compare our growth CapEx to the 43 digital billboards we added, please note the timing differences in construction can skew a per-board analysis. Many of these digital billboards were in process at the end of last year. When we look at digital growth CapEx, we are spending approximately $250,000 on a per-digital-board basis. This level's consistent with our average spend in 2013, which was 40% lower than our average cost back in 2009 and has allowed us to generate improving returns on these conversions. Secondly, despite the 43 added this quarter, we expect our total deployment in 2014 to be approximately 100. We'll deploy these prudently in our top markets, and we continue to expect that our capital expenditures for 2014 will be approximately $65 million. Slide 12 shows that we generate strong consistent funds from operations, or FFO, and adjusted FFO. You will see that the view of the first quarter of 2013 reflects 2 items that we believe make the year-over-year comparison more useful for your analysis. These items are: we have added $3.8 million in incremental standalone public company costs or $2.2 million after tax to equal the level of these costs that were incurred in Q1 2014. As we mentioned in connection with the IPO, we are incurring these incremental costs to build up our capabilities as a standalone public company. Secondly, we have also added $12.4 million of interest expense, or $7 million after tax, to reflect the incurrence of $1.6 billion of debt in January 2014. These 2 adjustments to Q1 2013 make that quarter's results much more comparable to the first quarter of 2014. We're also showing you per-share figures on an adjusted basis for the 120 million shares issued and outstanding when the IPO closed on April 2, 2014. The table shows you FFO of $0.42 and AFFO of $0.34. We saw 5% growth in FFO, 7.4% growth in AFFO and 68% growth in net income. The one item that these figures are not adjusted for is cash taxes, which we expect to be reduced significantly when we become a REIT. Nevertheless, in our first quarter results, you can see the strong conversion of revenue to adjusted OIBDA and into AFFO. This is one of the keys to our decision to become a REIT. This strong cash generation should let us pay a sustainable and healthy dividend, and with REIT rules requiring a 90% payout and our commitment to pay out 100% of the qualified REIT subsidiaries tax return taxable income, all potential growth in earnings will benefit shareholders through growth in dividends. Slide 13 is our balance sheet as of year end at March 31, 2014. And we believe it is strong and efficient with substantial financial flexibility. The most significant change is the January 2014 issuance of $1.6 billion of long-term debt, which is comprised of an $800 million of senior secured term loan, due 2021, and $800 million of senior unsecured notes, split equally between 2022 and 2024. The term loan is a floating rate, and the bonds are 5.25% and 5.625%, respectively. The weighted average cost of debt was 4.2%. And at March 31, our consolidated total leverage ratio was 3.8x. Excluding cash on hand, the ratio was 3.6x, which is within our target leverage range of 3.5x to 4x. In terms of liquidity, we had an undrawn $425 million revolving credit facility and $114 million of cash on hand as of March 31. The IPO closed on April 2. Net proceeds from the IPO were $615 million, of which $515 million were transferred to CBS as partial payment to the Outdoor business, and we retained the remaining $100 million. When a split from CBS occurs and we are no longer a part of the CBS consolidated tax return, we intend to let [ph] to be taxed as a REIT. And then we'll use that $100 million of residual IPO cash along with an estimated $400 million of stock as a required one-time dividend to our shareholders in what is known as an earnings and profit purge. We continue to expect this onetime distribution of cash and stock to be paid to our shareholders by January 31, 2015. From the operating results that Jeremy discussed earlier, I think you can see that our company has strong and stable revenue growth. We expect that a continued focus on revenue yield, cost optimization through lease expense rationalization and increased focus on operational efficiencies can improve our margins over time. As you've seen, this translates into significant cash flow generation that we expect to use for dividends and reinvestment in the business, and we expect cash flow to improve even further when we elect to be taxed as a REIT. Combined with our strong and efficient balance sheet, we look forward to reporting back to you in coming quarters on growth in AFFO per share. I'll now turn this back over to Jeremy.

Thanks, Don. What I'd like to do now is talk a little bit about the road ahead, including the current state of the market and our strategy going forward. Despite some of the headwinds you've been hearing about in terms of national advertising, we were pleased to deliver over 4% revenue growth in the first quarter. At this stage, we expect our second quarter revenues to grow in the low-single-digit range, and we're already seeing national advertising improving in the third quarter. Overall, we remain very confident in our ability to execute on our growth plans. In addition, we have several key strategic initiatives that we believe will enhance our growth on top of the great out-of-home industry drivers. As you can see on Slide 15, the first of these is digital. We're rolling out technology in a disciplined way in our top locations. We added 43 billboards during the quarter, bringing our total to 435. Digital has numerous benefits, both for us and for our clients, and it will be an important tool for attracting new advertisers to outdoor. Our disciplined approach to digital also shows in our focus on managing the business by revenue yield or revenue per display. We saw improved yield in the first quarter over the prior year. We're taking additional steps to drive this forward even more. A new sales management compensation plan we've recently put in place changes the focus to local market profitability. We're also diving deeper into our data to better align media rates with audience demographics. Transit franchises, as I mentioned, are a very important part of our business and complementary to our overall presence in the market. As you can see when you're in some of our major cities, we really are a must-buy for an advertiser to reach a specific target urban audience. And towards that end, we were pleased to renew our Washington, D.C. contract in Q1 with a new term of up to 7 years. Lastly, with 36% of the U.S. market held by independents, we see opportunistic tuck-in acquisitions in strategic markets as a way to enhance the organic growth of our underlying business. There are 3 key benefits to these acquisitions: firstly, we can enhance previous revenue by leveraging our national sales force; secondly, we can achieve synergies by leveraging our existing infrastructure; and thirdly, we can enhance shareholder returns through our REIT structure. So in summary, we had a good first quarter as a public company, both financially and with our -- with regards to our capabilities to operate as a standalone public REIT. I'm very pleased with the progress we've made, and I really believe that our top market focus, great mix of billboard and transit assets, our reenergized employees and the growth drivers I've just described, put us in an excellent position to drive shareholder value in the future. With that, operator, let's open the lines for questions.

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

Jeremy, can you talk a little bit more about why your footprint, particularly large markets and the international skew, puts you in a good position to grow over time? And obviously, we had Lamar results yesterday, but if you could sort of contrast your portfolio with theirs for us, that would be helpful. And then Don, you sort of answered the question, I think, in your prepared remarks on cost. But particularly as it relates to sort of your corporate and fixed cost line, is what we saw in Q1 sort of a good run rate through the rest of this year and beyond? I know high public company costs have come in, but the corporate costs were a little lower than we thought.

Thanks, Ben. Taking your first question. Yes, I mean, I guess when you look at ourselves and Lamar, the key difference is that around 20% of their revenue is driven by national advertisers; it's been around 40% for us. Now short term or probably to a quarter it's fair to say that these national revenues can be lumpier than local revenues. But we firmly believe that when you look at the U.S. out-of-home industry with the sort of 4.5%, then actually, the key driver in the future will be national advertisers. Because when you drill into the top 50 advertises, they're only spending about 2% of their dollars on out-of-home. So as I said, we think the key driver of getting that percentage up will be national. And we think that they are primarily going to be looking to spend their dollars in the top DMAs, which are becoming increasingly important through lifestyle trends, such as urbanization. If you look at it, the top DMAs already take a greater share of media then absolutely relative to their population, and we think that those DMAs are going to become increasingly important over time.

Then on second question on costs, I expect our corporate and standalone public company costs to increase slightly over the next couple of quarters. Part of what happened this first quarter versus last year is what costs were transaction costs. Some of the underlying costs were filing to be a REIT and like which were quite heavy in first quarter of '13 were less in 2014. But offsetting that, obviously, we're hiring more people, increasing more capabilities. So I do expect that corporate costs -- standalone costs to increase a little bit more in second quarter, third quarter. We should be fully baked in, I think, by early third quarter, so a little bit of an increase to get ourselves full scale.

Your next question comes from the line of Drew Borst from Goldman Sachs.

I wanted to ask about a couple of the revenue trends from the first quarter. I think there were kind of 2 areas that were better than we expected. One of them was with the international. And I guess, the question there is whether you think the growth rate that we saw in the first quarter is kind of sustainable for the foreseeable quarters. And then I guess, it's the same question because the transit business was also another area of strength, and I guess the same question, is it sustainable?

Thanks, Drew. I guess the first point is that some of the revenues generally in our business can be quite lumpy depending on whether or not you had a particular large national advertiser in 1 quarter or whether or not they fall in the second quarter. I think that's the first point. I think we remain confident that we can show growth in our international business this year. But I wouldn't necessarily sort of pencil in that 7% or 8% that we saw in Q1. And certainly for our transit business, we speak a lot about this business because we honestly believe it is a great differentiator. Part of it is very much driven by revenues from the entertainment sector. They were pretty strong in Q1. They're looking pretty good again in Q3. So I think that will bounce around a bit, but I think, overall, it will be a good driver of growth for us this year.

And then maybe just a follow-up. Could you -- you keep mentioning the trends in 3Q look pretty good, which is leading me to believe that maybe -- is 2Q not maybe pacing as well? Or is that not really the right conclusion?

I think as we guided, or as I guided in my remarks a little bit earlier on, we're not going to be sort of giving out sort of absolute pacing numbers on a going-forward basis. I think we made that clear during our IPO roadshow as well. At the moment, we -- we're guiding to a low-single-digit growth in the second quarter, but I wouldn't really want to comment more on that at the moment, Drew.

Your next question comes from the line of Alexia Quadrani of JPMorgan.

Just a question on the advertising contracts getting a little bit shorter in the billboard industry. And I know that's something been going on for quite some time. Can you just talk to us about how that impacts, I guess, where do you think it eventually goes in terms of where do you think the eventual length of contracts will go and how that might impact your profitability, if at all?

I think that when you look at how out-of-home is used, and I'm principally here talking about national advertisers. I don't think that we see any particular change in terms of how local advertisers are using out-of-home. So in the 40% of our base that is being bought by national advertisers, and I think the way that our medium is used in the U.S. is more just sort of signposting medium underlying other media across quite a large period of time. So I refer to my script to the fact that it's very usual in Europe for out-of-home to be one of the campaign mediums. So, for example, you'd have TV on for 3 weeks and then out-of-home on for 2 weeks and then radio on and then possibly 2 weeks. And it was very much seen as a campaign medium. Whereas in the U.S. at the moment, it's principally seen as just a general support for the signposting branding medium. I think that we can change the way that out-of-home is perceived by those national advertisers as we go forward. And I think part of that will be about shorter campaigns because actually, the way out-of-home works is that you achieve your cover relatively quickly. So once -- so after sort of 2 or 3 weeks, all you're achieving after that is increased frequency. So I think that it can be very efficient for advertisers to buy it and in a greater number of -- that's shorter-term campaigns. From our point of view, we believe that chopping up our inventory into smaller slices will be incremental to profitability and yield.

Okay. And just one more in digital, if I may. When you convert a static board to a digital board, how long does it typically take for you to see the demand, the 4x to 6x demand that you have in a digital versus static? Is it immediate? Does it depend on the market? I guess, how long is that ramp period?

Obviously, it's slightly dependent on the individual market, Alexia. But typically, you would see that sort of revenue building up over the first sort of 3 months or so.

Your next question comes from the line of Tracy Young from Evercore.

Two questions if I could. The first question relates to lease expense. I may have missed it, but could you give us some sense as to the growth or decline during the quarter? And the second relates to international billboard timing. I know it's still a small percentage of your overall billboards, but it looked like there was a bit of a spike in first quarter. Could you just talk about that?

Lease expense is broken out in the information in the press release. We had a good management of the lease expenses, both on the billboard side and on the transit side. A number of renegotiated contracts on the lease side gave us some good perspective on that. Overall, the increase on lease and site cost was nominal for the quarter versus last year, which was a pretty good situation for us. A lot of that has to do with renegotiated transit contracts again, and we feel pretty good. We've got a good process in place in staying in front of our leases that are being renegotiated and trying to renew them at well below CPI and good process with that.

Tracy, can you just repeat your second question for me? I didn't quite catch it.

I'm sorry. It just looked like during the quarter that you had several new boards go up internationally. I know it's a small percentage, but is there -- was it just a timing thing? And as you mentioned, there were some boards that were coming online from fourth quarter.

Yes. To be honest, Tracy, the vast, vast majority of the increase that you saw in international there was purely yield growth on our current boards. We put a couple of new digital boards, 1 or 2 up in Canada and our first board down in Mexico. But -- sorry, the vast majority of that growth was all about yield -- improvement in yield.

Most of those digital installations were the back part of the quarter, so it was more organic on existing board.

Your next question comes from the line of Jim Goss from Barrington.

I've got a couple of them. First, I was wondering if you could please discuss your appetite for M&A activity, which you referred to in your presentation in the context of your shift to REIT status. Specifically, are there certain international markets that are sufficiently attractive that you would want to further entrench your position via M&A? And are there others you might want to be -- or be more likely to divest?

Thanks for the question, Jim. I think it's fair to say that we are pretty focused in terms of our M&A strategy towards our QRS qualifying REIT assets. So what that principally means is fixed assets in the U.S. So right now, I think it's unlikely that we would be deploying significant capital to international markets. When we look internationally, we've got a great business in Canada. We got a big business in Mexico. I think it's fair to say that in South America, we would either need to put on some weight there or take a different view in the future because while they're good assets and fast growing in potentially sort of fast-growing markets, if you take a longer-term view, right now they're probably a little subscale.

Okay. I was also wondering what you might consider to be a sustainable top line growth aspiration in your domestic markets given your urban focus and your platform mix. And how might you expect that number to be enhanced by digital growth or any of the other specific initiatives you would want to highlight?

If you look over time, it's fair to say that out-of-home has had very consistent growth. We also know that to some extent or other, out-of-home is a GDP-plus medium. So the GDP is at the sort of naughts and ones. It's difficult to get much beyond that. As soon as you start sort of driving GDP above that, you can then get the GDP plus. I mean, as we look forward, we believe that our platform, relative to others, that we should be able to get some enhanced growth compared to our competition. But we don't want to sort of guide to sort of a long-term growth rate right now.

Okay. And the last small thing. Continuing use of the CBS logo and branding in the future, does that come with the business? Or would it involve some payments one way or another on an ongoing basis?

The answer is that at some point over the sort of coming months, we're obviously going to be a completely independent company. And at that point in time, CBS will own 0 shares in us, and we will not have continuing use of the CBS name. There'll obviously be a time when we can't keep using it, so we will be going through a rebranding over the coming months. As we see it, CBS is obviously a great brand, but it's principally a consumer brand. So we believe that we can actually create a new, exciting, fresh B2B brand, if you like, and we're looking forward to taking on that challenge, and as you can imagine, we're going through that process right now, Jim.

If I may add on, we'll file with the S-11 as an agreement with CBS that within 90 days after the split is completed, we will need to change our name corporately, but we will have 18 months to change the logo on all of our structures. So name change within 90 days and 18 months, full implementation completion, if you would.

Your next question comes from the line of Jason Bazinet from Citi.

I just had 2 quick ones. I hope my team got this right. On the E&P purge, did you guys say $100 million of cash and $400 million of stock?

Jason, I did say that. That was the estimate -- I believe it was in the S-11. That's not a firm number. I mean, that is an estimate. And when you get to the date of the split, which is the termination of what the value is and our equity value compared to CBS's equity value is a key determinant on the amount of that purge. And the percentage between cash and stock still also has a little bit of movement. That was the essence of the S-11 and that was the reason that when they did the IPO, they left what they thought was the estimated cash portion of that purge on our balance sheet. That number will be firmed up and will be a much more definitive number when we get through the split and then obviously, very, very firm when the purge is delayed no later than January of next year. Does that help?

Yes, it does. And then on the overall ad market, I mean, a lot of the media companies have sort of put up, I would just say sort of squishy numbers. I mean, would you say that the ad market was sort of squishy in Q1? Softer than you would have thought 90 days ago?

I think generally if you look at the ad market, and we've certainly been listening to the other commentators. I think the ad market probably rose, yes, overall a little lighter than one anticipates -- anticipated. Now whether or not that was kind of the weather impact, particularly in the Northeast with retailers maybe sort of pulling back on the spend. So yes, I mean, I think that's probably right, Jason, I think probably a little lighter than we would have hoped.

Your last question comes from the line of Marci Ryvicker from Wells Fargo.

I have 2 kind of separate questions. The first, can you just clarify the Q2 low single digits, is that in constant dollars?

Yes, that would be a constant dollar number, Marci.

Okay. And then a follow-up to that is how much visibility do you have into the third quarter. Are you 50% booked at this point?

Right now, that would be in the order of -- yes, 50%, 55% booked, Marci, something like that.

Okay. And then the Private Letter Ruling. We know from Lamar's that I think they were surprised by the tax leakage. Was there anything surprising in your PLR, number one? And then number two, now that you have this, is it possible that the split off from CBS Corp. could come sooner?

Marci, there was nothing surprising in the ruling we received from the IRS. CBS's tax department was very responsive in all of this in working with the IRS and the regulators for a period of time. And what we received, we were -- I think CBS was very, very pleased about. In terms of timing, as you know, there's a 180-day lockup period, the determination of when to do the split-off is for you to ask CBS and the underwriters. It's not really a decision for us. So we're going to defer answering that question if you don't mind.

Okay. And then one last question. Just you mentioned cost controls and your focus on cost controls. Where can you actually cut costs here in the long term?

I don't think there's large opportunities. This was a very well-run business. There is not a lot of fat here. We do believe that in changing the focus from purely focusing on revenue to focusing on profitability and AFFO, that there are some things around the edges that we can do. Hopefully, we'll be able to be smart with our increased standalone public company costs but also really evaluating all the operational structures and looking at the lease cost maybe in a different way. I think it's been done very, very well, but I think there are a couple of areas around. We are trying to drive the thinking of the business down to profitability by market. I think as we [ph] talks about on the roadshow, our company has previous -- been very focused on revenues and has done a great job in servicing clients and developing great relationships, both locally and nationally, but the focus has not been necessarily on a local market basis on profitability. And so as Jeremy mentioned in his comments, we have changed our compensation structure so that our regional managers, our general managers, people in the market are now focused on both revenue and local OIBDA, if you will. [indiscernible] later. And I think that's a little bit different. It gets our sales people into the dialogue more on lease rationalization, where in the past they may not have had much of the staking money to do that because "I can sell a board, let me sell a board." I think there's a little bit of subtlety around that. I think so you can give some opportunities to maybe make some -- a little bit more smarter decisions, but I thought of wholesale cutting costs is working around the margins to be more profitable as a whole.

Thank you, Marci, and to all you for your questions and your interest today. I hope that this call has emphasized our good financial and operational progress as we move towards separating from CBS and becoming a REIT. We very much look forward to seeing you at some upcoming investor conferences and providing you with an update on our business in the second quarter. So thanks once again, and have a good day, everyone.

This concludes today's conference call. You may now disconnect.