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%…

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,…

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.