OUTFRONT Media Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our historical consolidated financial statements and the notes thereto in “Item 8. Financial Statements and Supplementary Data.” This MD&A contains forward-looking statements that involve numerous risks and uncertainties. The forward-looking statements are subject to a number of important factors, including, but not limited to, those factors discussed in “Item 1A. Risk Factors” and the “Cautionary Statement Regarding Forward-Looking Statements” section of this Annual Report on Form 10-K, that could cause our actual results to differ materially from the results described herein or implied by such forward-looking statements. Management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2020, as compared to the year ended December 31, 2019, is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC“) on February 26, 2021. Overview OUTFRONT Media is a real estate investment trust (“REIT”), which provides advertising space (“displays”) on out-of-home advertising structures and sites in the United States (the “U.S.”) and Canada. We currently manage our operations through two operating segments—U.S. Billboard and Transit, which is included in our U.S. Media reportable segment, and International. International does not meet the criteria to be a reportable segment and accordingly, is included in Other (see Item 8., Note 20. Segment Information to the Consolidated Financial Statements). In the third quarter of 2020, we sold all of our equity interests in certain of our subsidiaries (the “Sports Disposition”), which held all of the assets of our Sports Marketing operating segment, for a purchase price of approximately $34.6 million in cash, subject to closing and post-closing adjustments. The Sports Marketing operating segment was the marketing and multimedia rights holder for a variety of colleges, universities and other educational institutions across the U.S.. The operating results of our Sports Marketing operating segment through June 30, 2020, are included in our Consolidated Financial Statements and are included in Other in our segment reporting. Business We are one of the largest providers of advertising space on out-of-home advertising structures and sites across the U.S. and Canada. Our inventory consists of billboard displays, which are primarily located on the most heavily traveled highways and roadways in top Nielsen Designated Market Areas (“DMAs”), and transit advertising displays operated under exclusive multi-year contracts with municipalities in large cities across the U.S. and Canada. In total, we have displays in all of the 25 largest markets in the U.S. and approximately 150 markets in the U.S. and Canada. Our top market, high profile location focused portfolio includes sites in and around both Grand Central Station and Times Square in New York, various locations along Sunset Boulevard in Los Angeles, and the Bay Bridge in San Francisco. The breadth and depth of our portfolio provides our customers with a range of options to address their marketing objectives, from national, brand-building campaigns to hyper-local campaigns that drive customers to the advertiser’s website or retail location “one mile down the road.” In addition to providing location-based displays, we also focus on delivering mass and targeted audiences to our customers. Geopath, the out-of-home advertising industry’s audience measurement system, enables us to build campaigns based on the size and demographic composition of audiences. As part of our technology platform, we are developing solutions for enhanced demographic and location targeting, and engaging ways to connect with consumers on-the-go. Additionally, our OUTFRONT Mobile Network products allow our customers to further leverage location targeting with interactive mobile advertising. We believe out-of-home continues to be an attractive form of advertising, as our displays are always viewable and cannot be turned off, skipped, blocked or fast-forwarded. Further, out-of-home advertising can be an effective “stand-alone” medium, as well as an integral part of a campaign to reach audiences using multiple forms of media, including television, radio, print, online, mobile and social media advertising platforms. We provide our customers with a differentiated advertising solution at an attractive price point relative to other forms of advertising. In addition to leasing displays, we provide other value-added services to our customers, such as pre-campaign category research, consumer insights, print production and post-campaign tracking and analytics. 37 U.S. Media. Our U.S. Media segment generated 17% of its revenues in the New York City metropolitan area in 2021 and 16% in 2020, and generated 15% in the Los Angeles metropolitan area in each of 2021 and 2020. Our U.S. Media segment generated Revenues of $1,382.0 million in 2021 and $1,148.9 million in 2020, and Operating income before Depreciation , Amortization , Net gain on dispositions , Stock-based compensation , Restructuring charges and an Impairment charge (“Adjusted OIBDA”) of $382.9 million in 2021 and $268.9 million in 2020. (See the “Segment Results of Operations” section of this MD&A.) Other (includes International and through June 30, 2020, Sports Marketing). Other generated Revenues of $81.9 million in 2021 and $87.4 million in 2020, and Adjusted OIBDA of $10.4 million in 2021 and $0.4 million in 2020. COVID-19 Impact The ongoing novel coronavirus (“COVID-19”) pandemic and the related preventative measures taken to help curb the spread, including shutdowns and slowdowns of, and restrictions on, businesses, public gatherings, social interactions and travel (including reductions in foot traffic, roadway traffic, commuting, transit ridership and overall target audiences) throughout the markets in which we do business have had, and may continue to have, a significant impact on the global economy and our business. Though we remain able to continue to sell and service our displays, governmental restrictions have eased in most of our markets and most of our markets have commenced their economic recoveries, our billboard and transit businesses in many of the top DMAs, such as New York and Los Angeles, are still experiencing the significant impacts of the COVID-19 pandemic. In 2022, the COVID-19 pandemic may, among other things, (i) reduce or curtail our customers’ advertising expenditures and overall demand for our services through purchase cancellations or otherwise; (ii) increase the volatility of our customers’ advertising expenditure patterns from period-to-period through short-notice purchases, purchase deferrals or otherwise; and (iii) delay the collection of certain earned advertising revenues from our customers, all of which could have a material adverse effect on our business, financial condition and results of operation in 2022. As a result of the impact of the COVID-19 pandemic on our business and results of operations, we expect our key performance indicators and total revenues to incrementally improve in 2022 as compared to 2021, but some key performance indicators will continue to be materially lower in 2022 than pre-COVID-19 pandemic levels. We expect total revenues in 2022 to approach or potentially surpass pre-COVID-19 pandemic levels based on our current expectation of strong performance in total billboard revenues in our U.S. Media segment, which exceeded pre-COVID-19 pandemic levels during the second half of 2021. We expect total transit and other revenues in our U.S. Media segment to incrementally improve in 2022, but still remain materially below pre-COVID-19 pandemic levels. We also expect Adjusted OIBDA to incrementally improve in 2022, driven by improvements in our transit and other business, but remain below pre-COVID-19 pandemic levels. We expect total expenses to increase in 2022 as compared to 2021, and exceed pre-COVID-19 pandemic levels. In particular, we expect billboard property lease expenses, such as rental expenses, and posting, maintenance and other expenses, as a percentage of revenues, to be consistent with pre-COVID-19 pandemic levels. We expect transit franchise expenses, such as transit franchise payments, as a percentage of revenues, to decrease in 2022 as compared to 2021, but be higher in 2022 than pre-COVID-19 pandemic levels, primarily due to the guaranteed minimum annual payment amounts owed to the MTA and other transit franchise partners as total transit and other revenues incrementally improve in the future. In 2022, we will continue to focus on managing costs and expenses to offset any decreases in revenues in 2022 as compared to pre-COVID-19 pandemic levels, including engaging in constructive conversations with our transit franchise partners to mitigate any increases in transit franchise expenses, as a percentage of revenues. Results for the year ended December 31, 2021, are not indicative of the results that may be expected for the fiscal year ending December 31, 2022. Throughout the COVID-19 pandemic, we have prioritized the health and safety of our employees and customers by (i) utilizing a secure remote workforce as needed for personnel other than operations personnel who service our displays and certain other personnel, (ii) implementing deep cleaning, social distancing and other protective policies and practices in accordance with federal, state and local regulations and guidance across all offices and facilities, and (iii) communicating frequently with our employees and customers to address any concerns and updates to our policies. None of these actions have caused a significant disruption in our ability to manage the continuity of our business or our internal controls. We continue to monitor the evolving situation and guidance from federal, state and local public health authorities and may take additional actions based on their recommendations. When the COVID-19 pandemic subsides, there can be no assurances as to the time it may take to generate total revenues, particularly in our U.S. Media segment and with respect to our transit and other business, at pre-COVID-19 pandemic levels. There remains uncertainty around the severity and duration of the COVID-19 pandemic and the measures taken, or may be taken, in response to the COVID-19 pandemic, which will depend on numerous factors, including, among others, the emergence of new cases of COVID-19 and its variants, hospitalization and mortality rates, and the availability and distribution of safe and effective treatments and vaccines. Accordingly, the Company cannot reasonably 38 estimate the full impact of the COVID-19 pandemic on our business, financial condition and results of operations at this time, which may be material. Economic Environment Our revenues and operating results are sensitive to fluctuations in advertising expenditures, general economic conditions and other external events beyond our control, such as the COVID-19 pandemic as described above. We rely on third parties to manufacture and transport our digital displays. As a result of the current market-wide supply shortages and logistics disruptions as the economy recovers from the COVID-19 pandemic, we have experienced delays and price increases in 2021 with respect to certain of our digital displays, which will continue in 2022, and could have an adverse effect on our business, financial condition and results of operations. Business Environment The outdoor advertising industry is fragmented, consisting of several companies operating on a national basis, as well as hundreds of smaller regional and local companies operating a limited number of displays in a single or a few local geographic markets. We compete with these companies for both customers and structure and display locations. We also compete with other media, including online, mobile and social media advertising platforms and traditional advertising platforms (such as television, radio, print and direct mail marketers). In addition, we compete with a wide variety of out-of-home media, including advertising in shopping centers, airports, movie theaters, supermarkets and taxis. Increasing the number of digital displays in our prime audience locations is an important element of our organic growth strategy, as digital displays have the potential to attract additional business from both new and existing customers. We believe digital displays are attractive to our customers because they allow for the development of richer and more visually engaging messages, provide our customers with the flexibility both to target audiences by time of day and to quickly launch new advertising campaigns, and eliminate or greatly reduce print production and installation costs. In addition, digital displays enable us to run multiple advertisements on each display. Digital billboard displays generate approximately four times more revenue per display on average than traditional static billboard displays. Digital billboard displays also incur, on average, approximately two to four times more costs, including higher variable costs associated with the increase in revenue than traditional static billboard displays. As a result, digital billboard displays generate higher profits and cash flows than traditional static billboard displays. The majority of our digital billboard displays were converted from traditional static billboard displays. We have commenced deployment of state-of-the-art digital transit displays in connection with several transit franchises and are planning to increase deployments over the coming years. In the future, we expect revenues generated on digital transit displays will be a multiple of the revenues generated on comparable static transit displays. Subject to the impact of the COVID-19 pandemic, we intend to incur significant equipment deployment costs and capital expenditures in the coming years to continue increasing the number of digital displays in our portfolio. We built or converted 77 new digital billboard displays in the U.S. and 10 in Canada in 2021. Additionally, in 2021, we entered into marketing arrangements to sell advertising on 35 third-party digital billboard displays in the U.S. and 4 in Canada. In 2021, we built, converted or replaced 3,778 digital transit and other displays in the U.S. and 15 digital transit and other displays in Canada. The following table sets forth information regarding our digital displays. Digital Revenues (in millions) for the Year Ended December 31, 2021 Number of Digital Displays as of December 31, 2021 (a) Location Digital Billboard Digital Transit and Other Total Digital Revenues Digital Billboard Displays Digital Transit and Other Displays Total Digital Displays United States $ 280.5 $ 80.3 $ 360.8 1,401 12,610 14,011 Canada 27.6 1.0 28.6 237 120 357 Total $ 308.1 $ 81.3 $ 389.4 1,638 12,730 14,368 (a) Digital display amounts include 3,795 displays reserved for transit agency use. Our number of digital displays is impacted by acquisitions, dispositions, management agreements, the net effect of new and lost billboards, and the net effect of won and lost franchises in the period. Our revenues and profits may fluctuate due to seasonal advertising patterns and influences on advertising markets. Typically, our revenues and profits are highest in the fourth quarter, during the holiday shopping season, and lowest in the first quarter, as 39 advertisers adjust their spending following the holiday shopping season. As described above, our revenues and profits may also fluctuate due to external events beyond our control, such as the COVID-19 pandemic. We have a diversified base of customers across various industries. During 2021, our largest categories of advertisers were entertainment, health/medical and retail, which represented 18%, 10%, and 9% of our total U.S. Media segment revenues, respectively. During 2020, our largest categories of advertisers were entertainment, health/medical and retail, which represented 17%, 10% and 9% of our total U.S. Media segment revenues. Our large-scale portfolio allows our customers to reach a national audience and also provides the flexibility to tailor campaigns to specific regions or markets. In 2021, we generated approximately 42% of our U.S. Media segment revenues from national advertising campaigns, compared to approximately 41% in 2020. Our transit businesses require us to periodically obtain and renew contracts with municipalities and other governmental entities. When these contracts expire, we generally must participate in highly competitive bidding processes in order to obtain or renew contracts. Key Performance Indicators Our management reviews our performance by focusing on the indicators described below. Several of our key performance indicators are not prepared in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”). We believe these non-GAAP performance indicators are meaningful supplemental measures of our operating performance and should not be considered in isolation of, or as a substitute for, their most directly comparable GAAP financial measures. Year Ended December 31, (in millions, except percentages) 2021 2020 % Change Revenues $ 1,463.9 $ 1,236.3 18 % Organic revenues (a)(b) 1,463.9 1,214.5 21 Operating income 168.3 72.5 132 Adjusted OIBDA (b) 340.3 233.3 46 Adjusted OIBDA (b) margin 23 % 19 % Funds from operations (“FFO”) (b) attributable to OUTFRONT Media Inc. 195.1 82.6 136 Adjusted FFO (“AFFO”) (b) attributable to OUTFRONT Media Inc. 205.1 96.3 113 Net income (loss) attributable to OUTFRONT Media Inc. 35.6 (61.0) * * Calculation is not meaningful. (a) Organic revenues exclude revenues associated with a disposition and the impact of foreign currency exchange rates (“non-organic revenues”). We provide organic revenues to understand the underlying growth rate of revenue excluding the impact of non-organic revenue items. Our management believes organic revenues are useful to users of our financial data because it enables them to better understand the level of growth of our business period to period. Since organic revenues are not calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, revenues as an indicator of operating performance. Organic revenues, as we calculate it, may not be comparable to similarly titled measures employed by other companies. (b) See the “Reconciliation of Non-GAAP Financial Measures” and “Revenues” sections of this MD&A for reconciliations of Operating income to Adjusted OIBDA, Net income attributable to OUTFRONT Media Inc. to FFO attributable to OUTFRONT Media Inc. and AFFO attributable to OUTFRONT Media Inc. and Revenues to organic revenues. Adjusted OIBDA We calculate Adjusted OIBDA as operating income (loss) before depreciation, amortization, net (gain) loss on dispositions, stock-based compensation, restructuring charges and an impairment charge. We calculate Adjusted OIBDA margin by dividing Adjusted OIBDA by total revenues. Adjusted OIBDA and Adjusted OIBDA margin are among the primary measures we use for managing our business, evaluating our operating performance and planning and forecasting future periods, as each is an important indicator of our operational strength and business performance. Our management believes users of our financial data are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in managing, planning and executing our business strategy. Our management also believes that the presentations of Adjusted OIBDA and Adjusted OIBDA margin, as supplemental measures, are useful in evaluating our business because eliminating certain non-comparable items highlight operational trends 40 in our business that may not otherwise be apparent when relying solely on GAAP financial measures. It is management’s opinion that these supplemental measures provide users of our financial data with an important perspective on our operating performance and also make it easier for users of our financial data to compare our results with other companies that have different financing and capital structures or tax rates. FFO and AFFO When used herein, references to “FFO” and “AFFO” mean “FFO attributable to OUTFRONT Media Inc.” and “AFFO attributable to OUTFRONT Media Inc.,” respectively. We calculate FFO in accordance with the definition established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO reflects net income (loss) attributable to OUTFRONT Media Inc. adjusted to exclude gains and losses from the sale of real estate assets, depreciation and amortization of real estate assets, amortization of direct lease acquisition costs and the same adjustments for our equity-based investments and non-controlling interests, as well as the related income tax effect of adjustments, as applicable. We calculate AFFO as FFO adjusted to include cash paid for direct lease acquisition costs as such costs are generally amortized over a period ranging from four weeks to one year and therefore are incurred on a regular basis. AFFO also includes cash paid for maintenance capital expenditures since these are routine uses of cash that are necessary for our operations. In addition, AFFO excludes restructuring charges and losses on extinguishment of debt, as well as certain non-cash items, including non-real estate depreciation and amortization, a gain on disposition of non-real-estate assets, an impairment charge on non-real estate assets, stock-based compensation expense, accretion expense, the non-cash effect of straight-line rent, amortization of deferred financing costs and the same adjustments for our non-controlling interests, as well as the non-cash portion of income taxes, and the related income tax effect of adjustments, as applicable. We use FFO and AFFO measures for managing our business and for planning and forecasting future periods, and each is an important indicator of our operational strength and business performance, especially compared to other REITs. Our management believes users of our financial data are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in managing, planning and executing our business strategy. Our management also believes that the presentations of FFO and AFFO, as supplemental measures, are useful in evaluating our business because adjusting results to reflect items that have more bearing on the operating performance of REITs highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. It is management’s opinion that these supplemental measures provide users of our financial data with an important perspective on our operating performance and also make it easier to compare our results to other companies in our industry, as well as to REITs. Since Adjusted OIBDA, Adjusted OIBDA margin, FFO and AFFO are not measures calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, operating income (loss), net income (loss) attributable to OUTFRONT Media Inc., and revenues, the most directly comparable GAAP financial measures, as indicators of operating performance. These measures, as we calculate them, may not be comparable to similarly titled measures employed by other companies. In addition, these measures do not necessarily represent funds available for discretionary use and are not necessarily a measure of our ability to fund our cash needs. 41 Reconciliation of Non-GAAP Financial Measures The following table reconciles Operating income to Adjusted OIBDA, and Net income (loss) attributable to OUTFRONT Media Inc. to FFO attributable to OUTFRONT Media Inc. and AFFO attributable to OUTFRONT Media Inc. Year Ended December 31, (in millions) 2021 2020 Total revenues $ 1,463.9 $ 1,236.3 Operating income $ 168.3 $ 72.5 Restructuring charges — 5.8 Net gain on dispositions (4.5) (13.7) Impairment charge 2.5 — Depreciation 79.4 84.5 Amortization 66.0 61.3 Stock-based compensation 28.6 22.9 Adjusted OIBDA $ 340.3 $ 233.3 Adjusted OIBDA margin 23 % 19 % Net income (loss) attributable to OUTFRONT Media Inc. $ 35.6 $ (61.0) Depreciation of billboard advertising structures 56.0 61.6 Amortization of real estate-related intangible assets 50.9 48.8 Amortization of direct lease acquisition costs (a) 54.3 38.2 Net gain on disposition of real estate assets (1.5) (6.5) Adjustment related to equity-based investments 0.1 0.1 Adjustment related to non-controlling interests (0.3) (0.3) Income tax effect of adjustments (b) — 1.7 FFO attributable to OUTFRONT Media Inc. 195.1 82.6 Non-cash portion of income taxes (5.9) (5.9) Cash paid for direct lease acquisition costs (a) (48.8) (43.1) Maintenance capital expenditures (25.3) (17.8) Restructuring charges - severance (c) — 4.9 Other depreciation 23.4 22.9 Other amortization 15.1 12.5 Gain on disposition of non-real estate assets (d) (3.0) (7.2) Impairment charge on non-real estate assets (e) 2.5 — Stock-based compensation (c) 28.6 23.8 Non-cash effect of straight-line rent 6.5 11.2 Accretion expense 2.7 2.6 Amortization of deferred financing costs 7.1 6.6 Loss on extinguishment of debt 6.3 — Adjustment related to non-controlling interests — (0.1) Income tax effect of adjustments (f) 0.8 3.3 AFFO attributable to OUTFRONT Media Inc. $ 205.1 $ 96.3 (a) Variable commissions directly associated with billboard revenues. (b) Income tax effect related to Net gain on disposition of real estate assets. (c) In 2020, Restructuring charges relate to severance associated with workforce reductions made in response to the COVID-19 pandemic and includes stock-based compensation expenses of $0.9 million. (d) Gain related to the Sports Disposition. (See Item 8., Note 14. Acquisitions and Dispositions : Dispositions to the Consolidated Financial Statements.) (e) Impairment charge relates to an other-than-temporary decline in fair value of a cost-method investment. (f) Income tax effect related to Restructuring charges - severance and Gain on disposition of non-real estate assets. 42 FFO attributable to OUTFRONT Media Inc. in 2021 of $195.1 million increased $112.5 million, or 136%, compared to 2020, due primarily to higher operating income, higher amortization of direct lease acquisition costs and lower income taxes. AFFO attributable to OUTFRONT Media Inc. in 2021 of $205.1 million increased $108.8 million, or 113%, compared to 2020, due primarily to higher operating income, higher amortization of, net of cash paid for, direct lease acquisition costs and lower gains on dispositions. Analysis of Results of Operations Revenues We derive Revenues primarily from providing advertising space to customers on our advertising structures and sites. Our contracts with customers generally cover periods ranging from four weeks to one year. Revenues from billboard displays are recognized as rental income on a straight-line basis over the contract term. Transit and other revenues are recognized over the contract period. (See Item 8., Note 12. Revenues to the Consolidated Financial Statements.) Year Ended December 31, % Change (in millions, except percentages) 2021 2020 Revenues: Billboard $ 1,182.3 $ 978.6 21 % Transit and other 281.6 257.7 9 Total revenues 1,463.9 1,236.3 18 Organic revenues (a) : Billboard $ 1,182.3 $ 981.9 20 Transit and other 281.6 232.6 21 Total organic revenues (a) 1,463.9 1,214.5 21 Non-organic revenues: Billboard — (3.3) * Transit and other — 25.1 * Total non-organic revenues — 21.8 * Total revenues $ 1,463.9 $ 1,236.3 18 * Calculation is not meaningful. (a) Organic revenues exclude revenues associated with a disposition and the impact of foreign currency exchange rates (“non-organic revenues”). Total revenues increased $227.6 million, or 18%, and organic revenues increased $249.4 million, or 21%, in 2021 compared to 2020, driven by a 21% increase in billboard revenues, as the billboard market exceeded pre-COVID-19 pandemic levels in the second half of 2021, and a 9% increase in transit and other revenues, primarily due to stronger transit revenues. While transit revenues have increased, transit revenues remain materially below pre-COVID-19 pandemic levels, as ridership remains materially below pre-COVID-19 pandemic levels. In 2020, non-organic revenues exclude the impact of the Sports Disposition and reflect the impact of foreign currency exchange rates. Total billboard revenues increased $203.7 million, or 21%, in 2021 compared to 2020, primarily due to an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services from the COVID-19 pandemic lows in 2020. Organic billboard revenues in 2020 increased $200.4 million, or 20%, in 2021 compared to 2020, principally driven by an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services from the COVID-19 pandemic lows in 2020. Total transit and other revenues increased $23.9 million, or 9%, in 2021 compared to 2020, primarily driven by an increase in average revenue per display (yield), as we have experienced increases in overall demand for our services from the COVID-19 pandemic lows in 2020, partially offset by the impact of the Sports Disposition. 43 Organic transit and other revenues in 2021 increased $49.0 million, or 21%, compared to 2020, primarily driven by an increase in average revenue per display (yield), as we have experienced increases in overall demand for our services from the COVID-19 pandemic lows in 2020. Expenses Year Ended December 31, % Change (in millions, except percentages) 2021 2020 Expenses: Operating $ 784.0 $ 710.8 10 % Selling, general and administrative 368.2 315.1 17 Restructuring charges — 5.8 * Net gain on dispositions (4.5) (13.7) (67) Impairment charge 2.5 — * Depreciation 79.4 84.5 (6) Amortization 66.0 61.3 8 Total expenses $ 1,295.6 $ 1,163.8 11 * Calculation is not meaningful. Operating Expenses Our operating expenses are composed of the following: Billboard property lease expenses . These expenses reflect the cost of leasing the real property on which our billboards are mounted. These lease agreements have terms varying between one month and multiple years, and usually provide renewal options. Rental expenses are comprised of a fixed rental amounts and under certain agreements, also include contingent rent, which varies based on the revenues we generate from the leased site. The fixed portion of property leases are generally paid in advance for periods ranging from one to twelve months and expensed evenly over the contract term. Contingent rent is generally paid in arrears and is expensed as incurred when the related revenues are recognized. Transit franchise expenses . These expenses reflect costs charged by municipalities and transit operators under transit advertising contracts. All of these contracts have fixed terms, are typically terminable for convenience at the option of the governmental entity (other than with respect to the New York Metropolitan Transportation Authority (the “MTA”)), and generally provide for payments to the governmental entity based on a percentage of the revenues generated under the contract and/or a guaranteed minimum annual payment. The costs that are determined based on a percentage of revenues are expensed as incurred when the related revenues are recognized, and any guaranteed minimum annual payment is expensed over the contract term. Posting, maintenance and other site-related expenses . These expenses primarily reflect costs associated with posting and rotation, materials, repairs and maintenance, utilities, property taxes and, for periods prior to the Sports Disposition, direct costs associated with our Sports Marketing operating segment. Year Ended December 31, % Change (in millions, except percentages) 2021 2020 Operating expenses: Billboard property lease $ 404.6 $ 390.5 4 % Transit franchise 183.4 125.8 46 Posting, maintenance and other 196.0 194.5 1 Total operating expenses $ 784.0 $ 710.8 10 Billboard property lease expenses represented 34% of billboard revenues in 2021 and 40% in 2020. Billboard property lease expenses as a percentage of billboard revenues in 2021 were comparable to pre-COVID-19 pandemic levels. The decrease in billboard property lease expenses as a percentage of revenues in 2021 compared to 2020 is primarily due to an increase in billboard revenues and the impact of the COVID-19 pandemic in 2020. 44 Transit franchise expenses represented 73% of transit display revenues in 2021 and 61% in 2020. The increase in transit franchise expense as a percentage of revenues is primarily driven by guaranteed minimum annual payments to the MTA. As a result of the COVID-19 pandemic, in the second quarter of 2020, we amended agreements with substantially all of our transit franchise partners to pay based on a fixed percentage of revenue with no minimum annual guarantees. Substantially all of our franchise partners continued to be paid based on a fixed percentage of revenue throughout 2021, except for the MTA, for which minimum annual guarantee payments resumed at the beginning of 2021. Billboard property lease and transit franchise expenses increased by $71.7 million in 2021 compared to 2020, primarily due to higher guaranteed minimum annual payments to the MTA and higher billboard and transit revenues. Posting, maintenance and other expenses as a percentage of Revenues were 13% in 2021 and 16% in 2020. Posting, maintenance and other expenses increased $1.5 million, or 1%, in 2021 compared to 2020, primarily due to increased activity in 2021, resulting in higher compensation-related expenses, posting and rotation costs, maintenance costs and materials costs, as compared to the impact of cost-reduction measures taken in 2020 in response to the COVID-19 pandemic. These increases are partially offset by the impact of the Sports Disposition. Selling, General and Administrative Expenses (“SG&A”) SG&A expenses represented 25% of Revenues in each of 2021 and 2020. SG&A expenses increased $53.1 million, or 17%, in 2021 compared to 2020, primarily due to higher compensation-related expenses, including commissions, salaries and bonuses which were all significantly impacted in 2020 by the COVID-19 pandemic and actions taken in response to the decline in business activity. Professional fees were also higher in 2021 and these increases were partially offset by a lower provision for doubtful allowances in 2021 due to provisions recorded in 2020 as a result of the COVID-19 pandemic and the impact of the Sports Disposition. Restructuring Charges In 2020, we recorded restructuring charges of $5.8 million for severance charges associated with workforce reductions as a result of the COVID-19 pandemic, including $0.9 million for stock-based compensation. Net Gain on Dispositions Net gain on dispositions decreased $9.2 million, or 67%, in 2021 compared to 2020. The gain in 2020 was primarily related to a gain of $7.2 million related to the Sports Disposition and also included the sale of an office location in Canada. Impairment Charge In 2021, we recorded $2.5 million in impairment charges related to an other-than-temporary decline in fair value of a cost-method investment. Depreciation Depreciation decreased $5.1 million, or 6%, in 2021 compared to 2020. Amortization Amortization increased $4.7 million, or 8%, in 2021 compared to 2020, principally driven by higher amortization of intangible assets related to the MTA agreement. Interest Expense Interest expense, net, was $130.4 million (including $7.1 million of deferred financing costs) in 2021 and $131.1 million (including $6.6 million of deferred financing costs) in 2020. The decrease in Interest expense, net, in 2021 compared to 2020, was primarily due to lower interest rates, partially offset by a higher outstanding average debt balance and higher amortization of deferred financing costs. (See the “Liquidity and Capital Resources” section of this MD&A.) 45 Loss on Extinguishment of Debt In 2021, we recorded a loss on extinguishment of debt of $6.3 million relating to the redemption of our 5.625% Senior Unsecured Notes due 2024. Benefit (Provision) for Income Taxes The Benefit for income taxes was $3.4 million in 2021 compared to a Provision for income taxes of $1.1 million in 2020, due primarily to the gain related to the Sports Disposition in 2020. The effective income tax rate was 10.8% for 2021 and 1.9% for 2020. Net Income (Loss) Net income before allocation to non-controlling interests was $36.4 million in 2021 compared to a Net loss before allocation to non-controlling interest s of $60.2 million in 2020, due primarily to higher operating income, as we have experienced increases in customer advertising expenditures and overall demand for our services from the COVID-19 pandemic lows in 2020. 46 Segment Results of Operations We present Adjusted OIBDA as the primary measure of profit and loss for our reportable segments. (See the “Key Performance Indicators” section of this MD&A and Item 8., Note 20. Segment Information to the Consolidated Financial Statements.) We currently manage our operations through two operating segments—U.S. Billboard and Transit, which is included in our U.S. Media reportable segment, and International. International does not meet the criteria to be a reportable segment and accordingly, is included in Other . Our segment reporting therefore includes U.S. Media and Other . The following table presents our Revenues , Adjusted OIBDA and Operating income (loss) by segment in 2021 and 2020. In the third quarter of 2020, we completed the Sports Disposition. Historical operating results for our Sports Marketing operating segment through June 30, 2020, are included in Other . Year Ended December 31, (in millions) 2021 2020 Revenues: U.S. Media $ 1,382.0 $ 1,148.9 Other 81.9 87.4 Total revenues $ 1,463.9 $ 1,236.3 Operating income $ 168.3 $ 72.5 Restructuring charges — 5.8 Net gain on dispositions (4.5) (13.7) Impairment charge 2.5 — Depreciation 79.4 84.5 Amortization 66.0 61.3 Stock-based compensation (a) 28.6 22.9 Total Adjusted OIBDA $ 340.3 $ 233.3 Adjusted OIBDA: U.S. Media $ 382.9 $ 268.9 Other 10.4 0.4 Corporate (53.0) (36.0) Total Adjusted OIBDA $ 340.3 $ 233.3 Operating income (loss): U.S. Media $ 248.5 $ 132.8 Other 1.4 (0.4) Corporate (81.6) (59.9) Total operating income $ 168.3 $ 72.5 (a) Stock-based compensation is classified as Corporate expense. 47 U.S. Media Year Ended December 31, % Change (in millions, except percentages) 2021 2020 Revenues: Billboard $ 1,116.1 $ 926.5 20 % Transit and other 265.9 222.4 20 Total revenues 1,382.0 1,148.9 20 Operating expenses (733.2) (647.4) 13 SG&A expenses (265.9) (232.6) 14 Adjusted OIBDA $ 382.9 $ 268.9 42 Adjusted OIBDA margin 28 % 23 % Operating income $ 248.5 $ 132.8 87 Restructuring charges — 3.9 * Net gain on dispositions (1.5) (1.4) 7 Impairment charge 2.5 — * Depreciation and amortization 133.4 133.6 — Adjusted OIBDA $ 382.9 $ 268.9 42 * Calculation is not meaningful. Total revenues in the U.S. Media segment increased $233.1 million, or 20%, in 2021 compared to 2020, driven by a 20% increase in billboard revenues, as the billboard market exceeded pre-COVID-19 pandemic levels in the second half of 2021, and a 20% increase in transit and other revenues, primarily due to stronger transit revenues. While transit revenues have increased, transit revenues remain materially below pre-COVID-19 pandemic levels, as ridership remains materially below pre-COVID-19 pandemic levels. We generated approximately 42% in 2021 and 41% in 2020 of revenues in the U.S. Media segment from national advertising campaigns. Billboard revenues in the U.S. Media segment increased $189.6 million, or 20%, in 2021 compared to 2020, reflecting an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services from the COVID-19 pandemic lows in 2020. Transit and other revenues in the U.S. Media segment increased $43.5 million, or 20%, in 2021 compared to 2020, driven by an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services from the COVID-19 pandemic lows in 2020. Operating expenses in the U.S. Media segment increased $85.8 million, or 13%, in 2021 compared to 2020, primarily driven by higher guaranteed minimum annual payments to the MTA and higher revenues. Billboard property lease expenses in the U.S. Media segment represented 34% of billboard revenues in 2021 and 40% in 2020, and transit franchise expenses represented 74% of transit display revenues in 2021 and 62% in 2020. SG&A expenses in the U.S. Media segment increased $33.3 million, or 14%, in 2021 compared to 2020, primarily due to higher compensation-related expenses, including commissions, salaries and bonuses which were all significantly impacted in 2020 by the COVID-19 pandemic and actions taken in response to the decline in business activity, partially offset by a lower provision for doubtful allowances in 2021 due to provisions recorded in 2020 as a result of the COVID-19 pandemic. Adjusted OIBDA in the U.S. Media segment increased $114.0 million, or 42%, in 2021 compared to 2020. Adjusted OIBDA margin was 28% in 2021 and 23% in 2020. 48 Other Year Ended December 31, % Change (in millions, except percentages) 2021 2020 Revenues: Billboard $ 66.2 $ 52.1 27 % Transit and other 15.7 35.3 (56) Total revenues $ 81.9 $ 87.4 (6) Organic revenues (a) : Billboard $ 66.2 $ 55.4 19 Transit and other 15.7 10.2 54 Total organic revenues (a) 81.9 65.6 25 Non-organic revenues: Billboard — (3.3) * Transit and other — 25.1 * Total non-organic revenues — 21.8 * Total revenues 81.9 87.4 (6) Operating expenses (50.8) (63.4) (20) SG&A expenses (20.7) (23.6) (12) Adjusted OIBDA $ 10.4 $ 0.4 * Adjusted OIBDA margin 13 % — % Operating income (loss) $ 1.4 $ (0.4) * Restructuring charges — 0.9 * Net (gain) loss on dispositions (3.0) (12.3) (76) Depreciation and amortization 12.0 12.2 (2) Adjusted OIBDA $ 10.4 $ 0.4 * * Calculation is not meaningful. (a) Organic revenues exclude revenues associated with a disposition and the impact of foreign currency exchange rates (“non-organic revenues”). In the third quarter of 2020, we completed the Sports Disposition. The operating results of our Sports Marketing operating segment through June 30, 2020, are included in our Consolidated Financial Statements. Total Other revenues decreased $5.5 million, or 6%, in 2021 compared to 2020, reflecting the Sports Disposition, partially offset by an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services from the COVID-19 pandemic lows in 2020. In 2020, non-organic revenues exclude the impact of the Sports Disposition and reflect the impact of foreign currency exchange rates. Organic Other revenues increased $16.3 million, or 25%, in 2021, compared to 2020, driven by an increase in average revenue per display (yield) as we have experienced increases in overall demand for our services from the COVID-19 pandemic lows in 2020. Other operating expenses decreased $12.6 million, or 20%, in 2021 compared to 2020, driven by the impact of the Sports Disposition, partially offset by higher expenses in Canada. Other SG&A expenses decreased $2.9 million, or 12%, in 2021 compared to 2020, primarily driven by the impact of the Sports Disposition, partially offset by higher expenses in Canada. Other Adjusted OIBDA increased $10.0 million in 2021 compared to 2020, primarily driven by an increase in average revenue per display (yield) compared to 2020 as a result of the impact of the COVID-19 pandemic on overall demand for our services. 49 Corporate Corporate expenses primarily include expenses associated with employees who provide centralized services. Corporate expenses, excluding stock-based compensation and restructuring charges, were $53.0 million in 2021 and $36.0 million in 2020. Corporate expenses increased $17.0 million in 2021 compared to 2020, primarily due to higher compensation-related expenses, including salaries and bonuses which were all significantly impacted in 2020 by the COVID-19 pandemic and actions taken in response to the decline in business activity. Liquidity and Capital Resources As of December 31, % (in millions, except percentages) 2021 2020 Change Assets: Cash and cash equivalents $ 424.8 $ 710.4 (40) % Restricted cash — 1.6 (100) Receivables, less allowances of $18.5 in 2021 and $26.3 in 2020 310.5 209.2 48 Prepaid lease and franchise costs 12.5 5.4 131 Other prepaid expenses 17.8 14.4 24 Other current assets 11.7 33.7 (65) Total current assets 777.3 974.7 (20) Liabilities: Accounts payable 64.9 64.9 — Accrued compensation 74.5 35.0 113 Accrued interest 30.7 24.5 25 Accrued lease and franchise costs 60.1 65.8 (9) Other accrued expenses 40.3 38.0 6 Deferred revenues 30.9 29.5 5 Short-term debt — 80.0 (100) Short-term operating lease liabilities 187.5 176.5 6 Other current liabilities 18.8 20.7 (9) Total current liabilities 507.7 534.9 (5) Working capital $ 269.6 $ 439.8 (39) We continually project anticipated cash requirements for our operating, investing and financing needs as well as cash flows generated from operating activities available to meet these needs. Due to seasonal advertising patterns and influences on advertising markets, our revenues and operating income are typically highest in the fourth quarter, during the holiday shopping season, and lowest in the first quarter, as advertisers adjust their spending following the holiday shopping season. Further, certain of our municipal transit contracts require guaranteed minimum annual payments to be paid on a monthly or quarterly basis, as applicable. Our short-term cash requirements primarily include payments for operating leases, guaranteed minimum annual payments, interest, capital expenditures, equipment deployment costs and dividends. Funding for short-term cash needs will come primarily from our cash on hand, operating cash flows, our ability to issue debt and equity securities, and borrowings under the Revolving Credit Facility (as defined below), the AR Facility (as defined below) or other credit facilities that we may establish, to the extent available. In addition, as part of our growth strategy, we frequently evaluate strategic opportunities to acquire new businesses, assets or digital technology. Consistent with this strategy, we regularly evaluate potential acquisitions, ranging from small transactions to larger acquisitions, which transactions could be funded through cash on hand, additional borrowings, equity or other securities, or some combination thereof. Our long-term cash needs include principal payments on outstanding indebtedness and commitments related to operating leases and franchise and other agreements, including any related guaranteed minimum annual payments, and equipment deployment costs. Funding for long-term cash needs will come from our cash on hand, operating cash flows, our ability to issue debt and 50 equity securities, and borrowings under the Revolving Credit Facility or other credit facilities that we may establish, to the extent available. Although we have taken several actions to date to preserve our financial flexibility and increase our liquidity, our short-term and long-term cash needs and related funding capability may be adversely affected by the impact of the COVID-19 pandemic if cash on hand and operating cash flows decrease in 2022, and our ability to issue debt and equity securities and/or borrow under our existing or new credit facilities on reasonable pricing terms, or at all, may become uncertain. (See the “Overview—COVID-19 Impact” section of this MD&A.) The decrease in working capital as of December 31, 2021, compared to as of December 31, 2020 is primarily driven by lower cash and other current assets and higher short-term operating lease liabilities, partially offset by higher accounts receivables and lower short-term debt. Under the MTA agreement, which was amended in June 2020 and July 2021 (as amended, the “MTA Agreement”): • Deployments . We must deploy, over a number of years, (i) 5,433 digital advertising screens on subway and train platforms and entrances, (ii) 15,896 smaller-format digital advertising screens on rolling stock, and (iii) 9,283 MTA communications displays, subject to modification as agreed-upon by us and the MTA. We are also obligated to deploy certain additional digital advertising screens and MTA communications displays in subway and train stations and rolling stock that the MTA may build or acquire in the future (collectively, the “New Inventory”). After temporarily suspending deployment beginning in the first quarter of 2021, we have resumed deployment. • Recoupment of Equipment Deployment Costs. We may retain incremental revenues that exceed an annual base revenue amount for the cost of deploying advertising and communications displays throughout the transit system. As presented in the table below, recoupable MTA equipment deployment costs are recorded as Prepaid MTA equipment deployment costs and Intangible assets on our Consolidated Statement of Financial Position, and as these costs are recouped from incremental revenues that the MTA would otherwise be entitled to receive, Prepaid MTA equipment deployment costs will be reduced. If incremental revenues generated over the term of the agreement are not sufficient to cover all or a portion of the equipment deployment costs, the costs will not be recouped, which could have an adverse effect on our business, financial condition and results of operations. If we do not recoup all costs of deploying advertising and communications screens with respect to the New Inventory by the end of the term of the MTA Agreement, the MTA will be obligated to reimburse us for these costs. Deployment costs in an amount not to exceed $50.7 million, which are deemed authorized before December 31, 2020, will be paid directly by the MTA. For any deployment costs deemed authorized after December 31, 2020, the MTA and the Company will no longer be obligated to directly pay 70% and 30% of the costs, respectively, and these costs will be subject to recoupment in accordance with the MTA Agreement. We did not recoup any equipment deployment costs in 2021 and it is unlikely we will recoup equipment deployment costs in 2022. For 2022, we expect our MTA equipment deployment costs to be approximately $150.0 million. • Payments . We must pay to the MTA the greater of a percentage of revenues or a guaranteed minimum annual payment. Our payment obligations with respect to guaranteed minimum annual payment amounts owed to the MTA resumed on January 1, 2021, in accordance with the terms of the MTA Agreement, and any guaranteed minimum annual payment amounts that would have been paid for the period from April 1, 2020 through December 31, 2020 (less any revenue share amounts actually paid during this period using an increased revenue share percentage of 65%) will instead be added in equal increments to the guaranteed minimum annual payment amounts owed for the period from January 1, 2022, through December 31, 2026. The MTA Agreement also provides that if prior to April 1, 2028 the balance of unrecovered costs of deploying advertising and communications screens throughout the transit system is equal to or less than zero, then in any year following the year in which such recoupment occurs (the “Recoupment Year”), the MTA is entitled to receive an additional payment equal to 2.5% of the annual base revenue amount for such year calculated in accordance with the MTA Agreement, provided that gross revenues in such year (i) were at least equal to the gross revenues generated in the Recoupment Year, and (ii) did not decline by more than 5% from the prior year. • Term . In July 2021, we extended the initial 10-year term of the MTA Agreement to a 13-year initial term. We have the option to extend this initial 13-year term for an additional five-year period at the end of the 13-year initial term, subject to satisfying certain quantitative and qualitative conditions. We may utilize cash on hand and/or incremental third-party financing to fund equipment deployment costs over the next couple of years. However, given the uncertainty in the market around the severity and duration of the COVID-19 pandemic, we cannot reasonably estimate the aggregate financing amount, if any, at this time. As of December 31, 2021, we have issued surety bonds in favor of the MTA totaling approximately $136.0 million, which amount is subject to change as equipment installations are completed and revenues are generated. We expect transit franchise expenses, as a percentage of revenues, to decrease in 2022 51 as compared to 2021, but be higher than pre-COVID-19 pandemic levels. (See the “Overview—COVID-19 Impact” section of this MD&A.) As indicated in the table below, we incurred $95.9 million related to MTA equipment deployment costs in 2021 (which includes equipment deployment costs related to future deployments), for a total of $447.0 million to date, of which $33.9 million had been recouped from incremental revenues to date and as of December 31, 2021, $45.4 million has been funded by the MTA. As of December 31, 2021, 11,092 digital displays had been installed, of which 1,912 installations occurred in the fourth quarter of 2021, for a total of 3,712 installations in 2021. (in millions) Beginning Balance Deployment Costs Incurred Recoupment/MTA Funding Amortization Ending Balance Year Ended December 31, 2021: Prepaid MTA equipment deployment costs $ 204.6 $ 75.2 $ — $ — $ 279.8 Other current assets 28.0 6.2 (29.0) — 5.2 Intangible assets (franchise agreements) 58.4 14.5 — (9.9) 63.0 Total $ 291.0 $ 95.9 $ (29.0) $ (9.9) $ 348.0 Year Ended December 31, 2020: Prepaid MTA equipment deployment costs $ 171.5 $ 33.1 $ — $ — $ 204.6 Other current assets — 44.4 (16.4) — 28.0 Intangible assets (franchise agreements) 38.3 26.0 — (5.9) 58.4 Total $ 209.8 $ 103.5 $ (16.4) $ (5.9) $ 291.0 On February 23, 2022, we announced that our board of directors approved a quarterly cash dividend of $0.30 per share on our common stock, payable on March 31, 2022, to stockholders of record at the close of business on March 4, 2022. Debt Debt, net, consists of the following: As of December 31, (in millions, except percentages) 2021 2020 Short-term debt: Repurchase Facility $ — $ 80.0 Total short-term debt — 80.0 Long-term debt: Term loan, due 2026 598.2 597.8 Senior unsecured notes: 5.625% senior unsecured notes, due 2024 — 501.3 6.250% senior unsecured notes, due 2025 400.0 400.0 5.000% senior unsecured notes, due 2027 650.0 650.0 4.250% senior unsecured notes, due 2029 500.0 — 4.625% senior unsecured notes, due 2030 500.0 500.0 Total senior unsecured notes 2,050.0 2,051.3 Debt issuance costs (27.6) (28.3) Total long-term debt, net 2,620.6 2,620.8 Total debt, net $ 2,620.6 $ 2,700.8 Weighted average cost of debt 4.3 % 4.5 % 52 Payments Due by Period (in millions) Total 2022 2023-2024 2025-2026 2027 and thereafter Long-term debt $ 2,650.0 $ — $ — $ 1,000.0 $ 1,650.0 Interest 710.1 117.1 226.9 189.4 $ 176.7 Total $ 3,360.1 $ 117.1 $ 226.9 $ 1,189.4 $ 1,826.7 Term Loan The interest rate on the term loan due in 2026 (the “Term Loan”) was 1.9% per annum as of December 31, 2021. As of December 31, 2021, a discount of $1.8 million on the Term Loan remains unamortized. The discount is being amortized through Interest expense, net, on the Consolidated Statement of Operations. Revolving Credit Facility We also have a $500.0 million revolving credit facility, which matures in 2024 (the “Revolving Credit Facility,” together with the Term Loan, the “Senior Credit Facilities”). As of December 31, 2021, there were no outstanding borrowings under the Revolving Credit Facility. The commitment fee based on the amount of unused commitments under the Revolving Credit Facility was $1.8 million in 2021 and $1.4 million in 2020. As of December 31, 2021, we had issued letters of credit totaling approximately $4.1 million against the letter of credit facility sublimit under the Revolving Credit Facility. Standalone Letter of Credit Facilities As of December 31, 2021, we had issued letters of credit totaling approximately $72.7 million under our aggregate $81.0 million standalone letter of credit facilities. The total fees under the letter of credit facilities in 2021 and 2020 were immaterial. Accounts Receivable Securitization Facilities As of December 31, 2021, we have a revolving accounts receivable securitization facility (the “AR Facility”), which terminates in June 2022, unless further extended. Our 364-day uncommitted structured repurchase facility (the “Repurchase Facility”) expired on June 29, 2021, and we chose not to extend it. In connection with the AR Facility, Outfront Media LLC and Outfront Media Outernet Inc., each a wholly-owned subsidiary of the Company, and certain of the Company’s taxable REIT subsidiaries (“TRSs”) (the “Originators”), will sell and/or contribute their respective existing and future accounts receivable and certain related assets to either Outfront Media Receivables LLC, a special purpose vehicle and wholly-owned subsidiary of the Company relating to the Company’s qualified REIT subsidiary accounts receivable assets (the “QRS SPV”) or Outfront Media Receivables TRS, LLC a special purpose vehicle and wholly-owned subsidiary of the Company relating to the Company’s TRS accounts receivable assets (the “TRS SPV” and together with the QRS SPV, the “SPVs”). The SPVs may transfer undivided interests in their respective accounts receivable assets to certain purchasers from time to time (the “Purchasers”). The SPVs are separate legal entities with their own separate creditors who will be entitled to access the SPVs’ assets before the assets become available to the Company. Accordingly, the SPVs’ assets are not available to pay creditors of the Company or any of its subsidiaries, although collections from the receivables in excess of amounts required to repay the Purchasers and other creditors of the SPVs may be remitted to the Company. Outfront Media LLC will service the accounts receivables on behalf of the SPVs for a fee. The Company has agreed to guarantee the performance of the Originators and Outfront Media LLC, in its capacity as servicer, of their respective obligations under the agreements governing the AR Facility. Neither the Company, the Originators nor the SPVs guarantee the collectability of the receivables under the AR Facility. Further, the TRS SPV and the QRS SPV are jointly and severally liable for their respective obligations under the agreements governing the AR Facility. As of December 31, 2021, there were no outstanding borrowings under the AR Facility. As of December 31, 2021, there was no borrowing capacity under the AR Facility due to a voluntary temporary suspension of the AR Facility in accordance with the agreements governing the AR Facility; however, as of December 31, 2021, we had approximately $332.4 million of accounts receivable that could be used as collateral for the AR Facility. The commitment fee based on the amount of unused commitments under the AR Facility was immaterial in 2021 and 2020. 53 Senior Unsecured Notes On January 19, 2021, two of our wholly-owned subsidiaries, Outfront Media Capital LLC (“Finance LLC”) and Outfront Media Capital Corporation (“Finance Corp” and, together with Finance LLC, the “Borrowers”) issued $500.0 million aggregate principal amount of 4.250% Senior Unsecured Notes due 2029 (the “2029 Notes”) in a private placement. The 2029 Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and each of its direct and indirect domestic subsidiaries that guarantee the Senior Credit Facilities. Interest on the 2029 Notes is payable on January 15 and July 15 of each year, beginning on July 15, 2021. On or after January 15, 2024, the Borrowers may redeem at any time, or from time to time, some or all of the 2029 Notes. Prior to such date the Borrowers may redeem up to 40% of the aggregate principal amount with the net proceeds of certain equity offerings, provided that at least 50% of the aggregate principal amount of the 2029 Notes will remain outstanding after the redemption. On February 16, 2021, we used the net proceeds from the issuance of the 2029 Notes, together with cash on hand, to redeem all of our outstanding 5.625% Senior Unsecured Notes due 2024 (the “2024 Notes”) and to pay accrued and unpaid interest on the 2024 Notes, if any, to, but excluding, the redemption date, and to pay fees and expenses in connection with the 2029 Notes offering and the 2024 Notes redemption. In the first quarter of 2021, we recorded a Loss on extinguishment of debt of $6.3 million relating to the 2024 Notes on the Consolidated Statement of Operations. Debt Covenants Our credit agreement, dated as of January 31, 2014 (as amended, supplemented or otherwise modified, the “Credit Agreement”), governing the Senior Credit Facilities, the agreements governing the AR Facility, and the indentures governing our senior unsecured notes contain customary affirmative and negative covenants, subject to certain exceptions, including but not limited to those that restrict the Company’s and its subsidiaries’ abilities to (i) pay dividends on, repurchase or make distributions in respect to the Company’s or its wholly-owned subsidiary, Finance LLC’s capital stock or make other restricted payments other than dividends or distributions necessary for us to maintain our REIT status, subject to certain conditions and exceptions, (ii) enter into agreements restricting certain subsidiaries’ ability to pay dividends or make other intercompany or third-party transfers, and (iii) incur additional indebtedness. One of the exceptions to the restriction on our ability to incur additional indebtedness is satisfaction of a Consolidated Total Leverage Ratio, which is the ratio of our consolidated total debt to our Consolidated EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters, of no greater than 6.0 to 1.0. As of December 31, 2021, our Consolidated Total Leverage Ratio was 6.7 to 1.0 in accordance with the Credit Agreement. The terms of the Credit Agreement (and under certain circumstances, the agreements governing the AR Facility) require that we maintain a Consolidated Net Secured Leverage Ratio, which is the ratio of (i) our consolidated secured debt (less up to $150.0 million of unrestricted cash) to (ii) our Consolidated EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters, of no greater than 4.5 to 1.0. As of December 31, 2021, our Consolidated Net Secured Leverage Ratio was 1.1 to 1.0 in accordance with the Credit Agreement. As of December 31, 2021, we are in compliance with our debt covenants. Deferred Financing Costs As of December 31, 2021, we had deferred $30.3 million in fees and expenses associated with the Term Loan, Revolving Credit Facility, AR Facility and our senior unsecured notes. We are amortizing the deferred fees through Interest expense, net, on our Consolidated Statement of Operations over the respective terms of the Term Loan, Revolving Credit Facility, AR Facility and our senior unsecured notes. Interest Rate Swap Agreements We had several interest rate cash flow swap agreements to effectively convert a portion of our LIBOR-based variable rate debt to a fixed rate and hedge our interest rate risk related to such variable rate debt and as of December 31, 2021, only one interest rate cash flow swap agreement remains outstanding. The fair value of the swap positions was a net liability of approximately $0.4 million as of December 31, 2021, which is included in Other current liabilities on our Consolidated Statement of Financial Position, and $5.6 million as of December 31, 2020, which is included in Other liabilities on our Consolidated Statement of Financial Position. As of December 31, 2021, under the terms of the remaining agreement, we will pay interest based on an aggregate notional amount of $50.0 million, under a weighted-average fixed interest rate of 1.8%, with a receive rate of one-month LIBOR and which matures on June 30, 2022. The one-month LIBOR rate was approximately 0.1% as of December 31, 2021. 54 Equity At-the-Market Equity Offering Program We have a sales agreement in connection with an “at-the-market” equity offering program (the “ATM Program”), under which we may, from time to time, issue and sell shares of our common stock up to an aggregate offering price of $300.0 million. We have no obligation to sell any of our common stock under the sales agreement and may at any time suspend solicitations and offers under the sales agreement. In 2021, no shares of our common stock were sold under the ATM Program. As of December 31, 2021, we had approximately $232.5 million of capacity remaining under the ATM Program. Series A Preferred Stock Issuance On April 20, 2020, we issued 400,000 shares of our Series A Convertible Perpetual Preferred Stock (the “Series A Preferred Stock”), par value $0.01 per share. The Series A Preferred Stock ranks senior to the shares of the Company’s common stock with respect to dividend and distribution rights. Holders of the Series A Preferred Stock are entitled to a cumulative dividend accruing at the initial rate of 7.0% per year, payable quarterly in arrears, subject to increases as set forth in the Articles Supplementary, effective as of April 20, 2020 (the “Articles”). Dividends may, at the option of the Company, be paid in cash, in-kind, through the issuance of additional shares of Series A Preferred Stock or a combination of cash and in-kind, until April 20, 2028, after which time dividends will be payable solely in cash. So long as any shares of Series A Preferred Stock remain outstanding, the Company may not, without the consent of a specified percentage of holders of shares of Series A Preferred Stock, declare a dividend on, or make any distributions relating to, capital stock that ranks junior to, or on a parity basis with, the Series A Preferred Stock, subject to certain exceptions, including but not limited to (i) any dividend or distribution in cash or capital stock of the Company on or in respect of the capital stock of the Company to the extent that such dividend or distribution is necessary to maintain the Company’s status as a REIT; and (ii) any dividend or distribution in cash in respect of our common stock that, together with the dividends or distributions during the 12-month period immediately preceding such dividend or distribution, is not in excess of 5% of the aggregate dividends or distributions paid by the Company necessary to maintain its REIT status during such 12-month period. If any dividends or distributions in respect of the shares of our common stock are paid in cash, the shares of Series A Preferred Stock will participate in the dividends or distributions on an as-converted basis up to the amount of their accrued dividend for such quarter, which amounts will reduce the dividends payable on the shares of Series A Preferred Stock dollar-for-dollar for such quarter. The Series A Preferred Stock is convertible at the option of any holder at any time into shares of our common stock at an initial conversion price of $16.00 per share and an initial conversion rate of 62.50 shares of our common stock per share of Series A Preferred Stock, subject to certain anti-dilution adjustments and a share cap as set forth in the Articles. Subject to certain conditions set forth in the Articles (including a change of control), each of the Company and the holders of the Series A Preferred Stock may convert or redeem the Series A Preferred Stock at the prices set forth in the Articles, plus any accrued and unpaid dividends. Cash Flows The following table sets forth our cash flows in 2021 and 2020. Year Ended December 31, % (in millions, except percentages) 2021 2020 Change Cash provided by operating activities $ 98.8 $ 130.6 (24) % Cash used for investing activities (224.0) (53.2) * Cash provided by (used for) financing activities (162.2) 573.0 * Effect of exchange rate changes on cash, cash equivalents and restricted cash 0.2 0.7 (71) Net increase (decrease) to cash, cash equivalents and restricted cash $ (287.2) $ 651.1 * * Calculation is not meaningful. Cash provided by operating activities decreased $31.8 million, or 24%, in 2021 compared to 2020, due primarily to an increase in accounts receivables and prepaid MTA equipment deployment costs, partially offset by an increase in accrued expenses, a decrease in prepaid expenses and net income in 2021 compared to a net loss in 2020 due to increases in overall demand for our services. In 2021, we paid net cash of $52.4 million related to MTA equipment deployment costs and installed 3,712 digital displays. In 2020, we paid $61.1 million related to MTA equipment deployment costs and installed 2,803 digital displays. 55 Cash used for investing activities increased $170.8 million in 2021 compared to 2020, due primarily to higher cash paid for acquisitions and MTA franchise rights and lower proceeds from dispositions. The following table presents our capital expenditures in 2021 and 2020. Year Ended December 31, % (in millions, except percentages) 2021 2020 Change Growth $ 48.5 $ 35.7 36 % Maintenance 25.3 17.8 42 Total capital expenditures $ 73.8 $ 53.5 38 Capital expenditures increased $20.3 million, or 38%, in 2021 compared to 2020, primarily due to growth in digital displays and increased spending on software and technology, partially offset by lower spending on vehicles, office remodel projects and the installation of the most current LED lighting technology. For the full year of 2022, we expect our capital expenditures to be approximately $85.0 million, which will be used primarily for growth in digital displays, software and technology, the renovation of certain office facilities, safety-related projects and maintenance. This estimate does not include equipment deployment costs that will be incurred in connection with the MTA agreement (as described above), which will be recorded as Prepaid MTA equipment deployment costs and Intangible assets on our Consolidated Statement of Financial Position, as applicable. Cash used by financing activities was $162.2 million in 2021 compared to Cash provided by financing activities of $573.0 million in 2020. In 2021, we made a repayment of $80.0 million under the Repurchase Facility and paid total cash dividends of $57.5 million on the Series A Preferred Stock, our common stock and vested restricted share units granted to employees. In 2020, we received net proceeds of $400.0 million related to the offering of our 6.250% Senior Unsecured Notes due 2025, received net proceeds of $383.4 million related to the issuance of the Series A Preferred Stock to enhance our liquidity position in response to the COVID-19 pandemic, made net total repayments of $115.0 million on the AR Facility and the Repurchase Facility, and paid total cash dividends on the Series A Preferred Stock and on our common stock of $75.1 million. Cash paid for income taxes was $1.7 million in 2021 and $3.4 million in 2020. The decrease was due primarily to the taxable gain related to the Sports Disposition in 2020. Contractual Obligations We have agreements with municipalities and transit operators which entitle us to operate advertising displays within their transit systems, including on the interior and exterior of rail and subway cars and buses, as well as on benches, transit shelters, street kiosks, and transit platforms. Under most of these franchise agreements, the franchisor is entitled to receive the greater of a percentage of the relevant revenues, net of agency fees, or a specified guaranteed minimum annual payment. Guaranteed minimum annual payments are generally paid monthly. (See Item 8, Note 19. Commitments and Contingencies to the Consolidated Financial Statements.) Total future minimum payments for rental payments under operating leases for billboard sites, office space and equipment of $2,036.7 million include $1,960.4 million for our billboard sites. (See Item 8, Note 6. Leases to the Consolidated Financial Statements.) As of December 31, 2021, we had long-term debt of approximately $2.7 billion. Interest on the Term Loan is variable. For illustrative purposes, we are assuming an interest rate of 1.9% for all years, which reflects the interest rate as of December 31, 2021. An increase or decrease of 1/4% in the interest rate will change the annual interest expense by $1.4 million. (See Item 8, Note 9. Debt to the Consolidated Financial Statements.) In 2022, we expect to contribute $0.1 million to our defined benefit pension plans. Contributions to our defined benefit pension plans were $0.2 million in 2021 and $0.7 million in 2020. (See Item 8, Note 16. Retirement Benefits to the Consolidated Financial Statements.) 56 Off-Balance Sheet Arrangements Our off-balance sheet commitments primarily consist of guaranteed minimum annual payments. (See Item 8, Note 19. Commitments and Contingencies to the Consolidated Financial Statements for information about our off-balance sheet commitments.) Critical Accounting Policies The preparation of our financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. On an ongoing basis, we evaluate these estimates, which are based on historical experience and on various assumptions that we believe are reasonable under the circumstances, including the impact of extraordinary events such as the COVID-19 pandemic. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions, including the severity and duration of the COVID-19 pandemic. We consider the following accounting policies to be the most critical as they are significant to our financial condition and results of operations, and require significant judgment and estimates on the part of management in their application. For a summary of our significant accounting policies, see Item 8., Note 2. Summary of Significant Accounting Policies to the Consolidated Financial Statements. MTA Agreement Under the MTA agreement, we are obligated to deploy, over a number of years, (i) 5,433 digital advertising screens on subway and train platforms and entrances, (ii) 15,896 smaller-format digital advertising screens on rolling stock, and (iii) 9,283 MTA communications displays, with such deployment amounts being subject to modification as agreed-upon by us and the MTA. In addition, we are entitled to generate revenue through the sale of advertising on transit advertising displays and incur transit franchise expenses, which are calculated based on contractually stipulated percentages of revenue generated under the contract, subject to a minimum guarantee. Title of the various digital displays transfers to the MTA on installation, therefore the cost of deploying these screens throughout the transit system does not represent our property and equipment. The portion of recoupable MTA equipment deployment costs expected to be reimbursed from transit franchise fees that would otherwise be payable to the MTA are recorded as Prepaid MTA equipment deployment costs on the Consolidated Statement of Financial Position and charged to operating expenses as advertising revenue is generated. The short-term portion of Prepaid MTA equipment deployment costs represents the costs that we expect to recover from the MTA in the next twelve months. The portion of deployment costs expected to be reimbursed from advertising revenues that would otherwise be retained by us under the contract are recorded as Intangible assets on the Consolidated Statement of Financial Position and charged to amortization expense on a straight-line basis over the contract period. We assess the recoverability of the MTA contract on an as-needed basis and apply significant judgment in assessing factors to determine if there is an indication that the revenues expected to be generated over the term of the agreement will be sufficient to cover all or a portion of the equipment deployment costs, including evaluating macroeconomic conditions (such as the impact of the COVID-19 pandemic), industry trends, and events specific to the Company, including monitoring the Company’s actual installation of digital displays against the deployment schedule. Additionally, we assess these factors by comparing revenue projections of the deployed digital displays to actual financial results. If we do not generate sufficient advertising revenues from the MTA contract, there is a risk that the related Prepaid MTA equipment deployment costs and Intangible assets may not be recoverable. Management assesses the prepaid MTA equipment deployment costs for recoverability on a quarterly basis. This assessment requires evaluating qualitative and quantitative factors to determine if there is an indication that the carrying amount may not be recoverable. Management applies significant judgment in assessing these factors, including evaluating macroeconomic conditions, industry trends, and events specific to the Company, including monitoring the Company’s actual installation of digital displays against the initial deployment schedule. Additionally, management assesses quantitative factors by comparing revenue projections of the deployed digital displays to actual financial results. In 2021, we updated our projections and did not identify a triggering event for an impairment review of our Prepaid MTA equipment deployment costs . The assumptions and estimates included in our analysis require significant judgment about future events, market conditions and financial performance. Given the uncertainty around the severity and duration of the COVID-19 pandemic and the measures taken, or may be taken, in response to the COVID-19 pandemic, actual results may differ from our assumptions and estimates, which may result in impairment charges in the future. 57 Goodwill We test goodwill qualitatively and/or quantitatively at the reporting-unit level annually for impairment as of October 31 of each year and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount. A qualitative test assesses macroeconomic conditions, industry and market conditions, cost factors, overall financial performance and other relevant entity specific events, as well as events affecting a reporting unit. If after the qualitative assessment, we determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative assessment. We may also choose to only perform a quantitative assessment. We compute the estimated fair value of each reporting unit for which we perform a quantitative assessment by using an income approach. Under the income approach, the fair value is determined using a discounted cash flow model. Our discounted cash flow value is calculated by adding the present value of the estimated annual cash flows over a discrete projection period to the terminal value, which represents the value of the projected cash flows beyond the discrete projection period. Our discounted cash flow model requires us to use significant estimates and assumptions such as projected revenue growth rates, terminal growth rates, billboard lease and transit franchise expenses, other operating and selling, general and administrative expenses, capital expenditures, contract renewals and extensions, and discount rates. The estimated growth rates, operating margins and capital expenditures for the projection period are based on our internal forecasts of future performance as well as historical trends. The terminal value is estimated based on a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections. The discount rates represent the weighted average cost of capital derived using known and estimated market metrics. There can be no assurance that these estimates and assumptions will prove to be an accurate prediction of the future, and a downward revision of these estimates and/or assumptions would decrease the fair values of our reporting units, which could result in additional impairment charges in the future. In the fourth quarter of 2021, we performed a qualitative assessment of two of our reporting units and a quantitative assessment of our other reporting unit for possible goodwill impairment. No impairment was identified for any of our reporting units. Based on our most recent impairment analysis, the fair value of our reporting units exceeded their respective carrying values by 20% or more. Long-Lived Assets We report long-lived assets, including billboard advertising structures, other property, plant and equipment and intangible assets, at historical cost less accumulated depreciation and amortization. We depreciate or amortize these assets over their estimated useful lives, which generally range from three to 40 years. For billboard advertising structures, we estimate the useful lives based on the estimated economic life of the asset. Transit fixed assets are depreciated over the shorter of their estimated useful lives or the related contractual term. Our long-lived identifiable intangible assets primarily consist of acquired permits and leasehold agreements and franchise agreements, which grant us the right to operate out-of-home advertising structures in specified locations and the right to provide advertising displays on railroad and municipal transit properties. Our long-lived identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives, which is the respective life of the agreement and in some cases includes an estimation for renewals, which is based on historical experience. Long-lived assets subject to depreciation and amortization are also reviewed for impairment when events and circumstances indicate that the long-lived asset might be impaired, by comparing the forecasted undiscounted cash flows to be generated by those assets to the carrying values of those assets. The significant assumptions we use to determine the useful lives and fair values of long-lived assets include contractual commitments, regulatory requirements, future expected cash flows and industry growth rates, as well as future salvage values. We test for long-lived asset impairment whenever there is an indication that the carrying amount of the asset may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows generated by those assets to the respective asset’s carrying value, excluding any impacts from foreign currency translation adjustments reflected in Accumulated other comprehensive loss on the Consolidated Statement Financial Position in conformity with GAAP. The amount of impairment loss, if any, will be measured by the difference between the net carrying value and the estimated fair value of the asset and recognized as a non-cash charge. Long-lived assets held for sale are required to be measured at the lower of their carrying value (including unrecognized foreign currency translation adjustment losses) or fair value less cost to sell. Accounting Standards See Item 8., Note 2. Summary of Significant Accounting Policies to the Consolidated Financial Statements, for information about adoption of new accounting standards and recent accounting pronouncements. 58