Ladies and gentlemen, thank you for standing by. Welcome to the 2015 Third Quarter Earnings Conference Call for iHeartMedia Inc. and Clear Channel Outdoor Holdings Inc. At this time, all phone lines are in a listen-only mode. [Operator Instructions] As a reminder, today's conference call is being recorded. And with that, I will now turn the conference over to your host, Effie Epstein, Head of Investor Relations. Please go ahead.

Good morning and thank you for joining our 2015 third quarter earnings call. On the call today are Rich Bressler, President, Chief Operating Officer and Chief Financial Officer; and Brian Coleman, Senior Vice President and Treasurer. We'll provide an overview of the third quarter 2015 financial and operating performances of iHeart Media Inc. and its subsidiaries, iHeartMedia Capital One LLC and iHeartCommunications Inc. and Clear Channel Outdoor Holdings Inc. For purposes of this call when we describe the financial and operating performance of iHeartMedia Inc. that also describes the performance of its subsidiaries iHeartMedia Capital One LLC and iHeartCommunications Inc. After an introduction and review of the quarter, we'll open up the line for questions. Before we begin, I would like to remind everyone that this conference call includes forward-looking statements. These statements include Management's expectations, beliefs and projections about performance and represent Management's current beliefs. There can be no assurance that Management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations. Please review the statements of risk contained in our earnings press releases and filings with the SEC. Pacing data will also be mentioned during the call. For those of you not familiar with pacing data, it reflects revenue booked at a specific date versus the comparable date in a prior period and may or may not reflect the actual revenue growth rate at the end of the period. During today's call, we will provide certain performance measures that do not conform to Generally Accepted Accounting Principles. We provide schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press releases and a slide presentation, which can be found on the investors section of our website iheartmedia.com and clearchanneloutdoor.com. Please note that our two earnings releases and the slide presentation provide a detailed breakdown of foreign exchange and non-cash compensation expense items as well as segment revenues and OIBDAN. Please note that the information provided on this call speaks only to Management's views as of today, November 05 and may no longer be accurate at the time of the replay. With that, I will now turn the call over to Rich Bressler.

Thank you, Effie, and good morning, everybody. We delivered another quarter of top line growth across our business segments as we continue to build on the power of sound, the power of outdoor and the power of mobile to create powerful marketing solutions for our partners. In an advertising marketplace that continues to evolve, we believe we are in a leadership position as the world begins to recognize radio and outdoor for what they are, digital mediums. We are investing our capabilities to automate the sales process, analyze unique data we have on our consumers, and provide programmatic buying. We believe that simplifying the buying process for agencies and advertisers provides us with a competitive advantage against both traditional and digital-only media companies. As one advertising agency executive recently told me, and I quote, "You can't be in the advertising business without being in the data business." When we look at companies with major audiences in this country, in our view there are three. Facebook, Google and iHeartMedia, and we are bringing both the iHeartMedia and outdoor businesses into the digital age through the development of data-infused solutions for advertisers that we believe will provide the efficiency and ease of automated buying. Both radio and outdoor are true mass-market mediums, and with recent studies showing the audience declines in television, which I will expand on shortly, we believe that our platform and our partners stand to benefit from the key consumer trend of spending more time out of the house. Our diverse portfolio of assets, digital, broadcast, at home, mobile, social, event and more, enables us to connect advertisers and brands to consumers in innovative and exciting ways. A great example of how we use our assets together is the work we are doing with our long-time advertising partner Coca-Cola…

[Operator Instructions] And our first question comes from the line of Jason Kim, please go ahead.

Hey, good morning. First question for either Rich or Brian. Can you talk about the working capital trends thus far this year? I know it is a volatile line item but so far it's been a bit of a tracking cash flow, so I was wondering if you can give us some color on any particular drivers and can you comment on how much incremental senior debt capacity you currently have, pro forma, for the ADR usage during the quarter?

Yes, I will take those in reverse order. With respect to incremental senior debt, we don't really update baskets under the various debt agreements that we have. But we have provided guidance in the past that we preserve enough senior debt capacity under our most restrictive indenture to be able to borrow under the ABL. And I think it was in December of 2013 we had $250 million drawn under the ABL and there hasn't been any material change in the quantum of senior secured debt. So I think it's safe for the market to assume that we have at least $250 million of ABL capacity. So we've drawn $190 million. There's at least $250 million, and that's not a definitive. That's at the least how much we can draw. But I think that's the information that's in the public domain so you should assume that there is at least $250 million minus the $190 million of availability, so at least $60 million if my quick math is right. With respect to working capital, one of the things that we've been focused on over the past couple of years is improving our accounts receivable collection processes and our payable systems. We've invested a lot of time and a lot of resources and we've seen a lot of success over the past couple of years. What we've seen I think the past couple of quarters here is an increase in working capital usage, particularly with respect to accounts receivable. It was more acute last quarter. This quarter, I think Rich addressed in his opening remarks that it was largely driven by some spoke international activity, at least with respect to the UK where we had an agency that was slow pay which has subsequently been resolved. In China, we've seen an economic slowdown string out payments and increase AR. I think it's certainly something we keep our eyes on because we have had such success over the past couple of years. Our comparables year-over-year may not be as interesting, and sequentially we have seen an increase in working capital. We are focused on working capital. We're focused on liquidity. And as working capital is a component of liquidity, we will remain focused and continue to improve things. And when we are off target, we'll do our best to explain why that is, and it rose to the level of significance that Rich even addressed in his open remarks.

Understood. I know this question comes up every quarter but any updates on the LA digital board situation can you provide for us?

No. There's really – and as the answer has been since the last couple of quarters, we always say, I think probably the smartest thing I did when I came in a couple of years ago was say that I wasn't going to predict the timeframe here. I'm still not going to predict the timeframe. So there's really no update to what we've said in the past. We are continuing with the city on legislative solutions that allow us to have the digital boards back within the LA city limits. We're still expecting a couple more hearing for those of you that all follow this closely, before the next City Council votes on the ordinance. That's likely to be early next year. This process does take time for better or worse and in the interim, I think as we mentioned on the last couple of calls, we've converted all the boards back to static mostly through wrapping the boards over the existing digital faces, and just as a quick reminder we currently have 37 digital boards in the LA metropolitan area.

Got it. And then my last question is I was just curious to hear your thoughts about your general views about future liability management strategy. Obviously you've cleared all of your 2016, banked the maturities proactively, and earlier this year you even bought back some of the 2018 unsecured notes that are at a discount. The market conditions had been pretty weak and a lot of your bonds are trading at prices lower prices now. So at least at the moment, simply pushing out maturities is not as straightforward as it has been in the past few years. But at the same time, your trading levels of your debt decreased some other opportunities from a liability management side. And I know that's a long-winded question, but I was just wondering what your thought process and views on how the capital structure evolves from here?

You had me at liability management, Jason. I totally get it. The conflict that we have is of course our focus on liquidity and ensuring that we can continue to fund operations, fund debt maturities. We've built a liquidity runway and we're trying to grow operations during that period of time. Refinancing capabilities in this marketplace particularly at the unsecured level is something that we may not be able to rely upon if the markets continue to be weak into the future. We can't predict that but we always have to err on the side of conservatism. That being said, it is not lost on us where debt trading levels are and given excess liquidity or sufficient liquidity, we do feel there are opportunities for liability management activities. As you mentioned, we were active in late Q3 and Q4 of last year and should things line up where we have excess liquidity and there are opportunities as there are today to execute or effectuate some liability management activities, it is a nice way to reduce leverage by managing the debt side of the equation while 99.9% of the rest of the company that is working on growing the EBITDA side of the equation. So I guess what I can say to you is, we are aware of the opportunity. We have to balance liquidity with liability management activity. There may be ways that we can effectuate liability management activities that is liquidity neutral or doesn't have a material impact on liquidity, and that's certainly something that we are considering, but that's the challenge that we have and so we recognize the issue. We want to be optimistic we have in the past, but I don't really have any plans to unveil to you at this point in time.

Thanks for your thoughts.

And we do have a question from the line of Avi Steiner, please go ahead.

Thanks for taking the question and I apologize if we are going to continue on this theme here, but Brian maybe you could talk to how you get to that excess liquidity point. Can you talk to your comfort with your liquidity with respect to 2016, and again I realize some of this is repetitive. Your comfort with liquidity going into the first quarter which I think is historically been your seasonally low point in terms of cash generation, and then I've got a couple more – or high point of cash use I should say.

Sure, Avi, I think I got one question last quarter, so I'm feeling honored on this call. I'm going to address what I think I heard is your question and then if I missed anything we can kind of circle back. I think ultimately all the questions are going to surround our ability, our comfort level with respect to liquidity. I am comfortable with respect to liquidity, and let me tell you why? I think first and foremost as Rich talked to, the underlying fundamentals of the business seem pretty sound. It's a tough operating environment, but when you look at us and how we've been able to differentiate ourselves from “peers”, I think we're doing the right thing, we're making the right investments and we will continue to grow the business. I also look at, is there any near-term liquidity concern. We don't have any debt maturities until December of 2016 and it's $197 million because we've already proactively addressed $20 million of it. We do have higher interest expense and we do burn cash between now and then, but it's because we continue to invest in the business and we intend to grow the business in that period of time and narrow that cash burn. We need to make sure that we have a liquidities bridge from here to there, and I think we do, because I think my third point is we have numerous liquidity levers. So let's talk about those. I don't think any these are going to be new. But it may be a good refresher to think about it. One is to continue to improve free cash flow. As I mentioned earlier, 99% of the business is focused on that. And I think again, that's where the focus needs to be. But from our…

Avi, it's Rich. Let me add two things, a couple of things on operating basis. Without saying anything or predicting anything about our results going forward, you can see a bunch of operating and financial metrics in terms of the momentum of the overall business. I'm sure [indiscernible] get some questions or not, but I spoke about things like programmatic and we're in the early days of using buying and selling functionality on a national level. We expect to roll it out early next year. And remember, our platform is unique. The investments we have in the iHeart brand, national sales team, events platform are paying off. We are starting – and you're seeing it bring new dollars to the sectors out there. 2016 is a political year just as a reminder to all of us. I'm not going to comment anything specific to iHeart, but you saw it was in the press this morning actually pretty widely reported that Trump has started to spend money on radio advertising. I think in the radio trades today, I'm not – but it was impressive it was as widely reported as it was, Ted Cruz is starting spend money on radio advertising today. Inside Radio published some numbers about expectations for radio with research from Burrell for 2016 that the expectation of political and pies is going to be somewhere like $827 million to be exact. A significant amount of money that they are predicting will go into radio and again, that's one of the reasons we bought Kenny Day in, who I mentioned in my remarks is leading our efforts and his background. He's a digital programmatic ad buying guy. It's going to be integral to our ability to provide the campaigns and the national campaigns and to deal with the issues in a way that we believe will well position us to maximize our share of the pie out there. And just as reminder in 2012 with a total spending that was estimated to be dramatically less than 2016, we took in $105 million in political.

I appreciate that color, Rich. Certainly political in 2016 isn't lost on me. A couple more here and thank you for the time. And maybe sticking on a liquidity asset sale theme perhaps. I think your competitor just sold some assets in Latin America to [indiscernible], and I'm curious if there's anything to read from that with respect to you, and maybe more pointedly from my seat. I think you have a $900 million assets sale basket, Brian, and can you tell us much how much of that is used and specifically I'm referring to the basket that if you sold assets out of – I'm getting this right non-guaraned subs you don't have to pay down the bank debt first. I hope I got that right, but go ahead.

I will let Brian address the second part of your question. Look, no surprise I think to any of us in the industry about the upfront Latin American sale to the co [ph] seems consistent I don't know anything than that other than you guys know that you've read, but it does seem consistent with their desire to remain focused primarily on REIT-able assets there.

And you talked a little bit about disposition baskets and use of proceeds and stuff, so I'm not sure I’m going to get the answer completely right, so we can come back to it. But what I did hear was a question about the $900 million disposition basket under our credit agreement, that's accurate. We don't refresh what's outstanding under the basket but I think I can say that most of the asset sales that we've done have either been deminimus, and so they didn't count against that basket or it's been structured in such a way it was an investment to an unrestricted subsidiary. And we like that technique because investment basket is refreshable, so we can move assets in the unrestricted subsidiary, we have greater flexibility to do the proceeds and we have a lot of value that we've built up in the unrestricted subsidiary so we can pull cash or other assets back into the restricted group to refresh the investment basket. The one exception that I can think of, Avi, was the disposition of our Australia-New Zealand radio business. And I don't remember the number but it was plus $200 million. That was done within the restricted group and would have impacted that basket. So think if you take the $900 million and take away the $220 million, that's probably a pretty good estimate based on public information of what's available.

I will turn it over. Thanks for the time gentlemen.

Thanks, Avi.

And our next question comes from the line of Lance Vitanza, please go-ahead.

Hi, thanks. I was looking at the other segment. Could you talk a little bit about what's going on there? I know it's not huge, but revenue and EBITDA were down a lot there. A little clarity would help.

Sure, a couple of things. That's primarily Katz and just a few things as a reminder, just first actually last year in the third quarter we recorded approximately $12 million in revenue in that line with respect to cash flow. It's an early termination fee for the termination for a representation contract that we had last year. And second, we're striving not to have a lack of political dollars as we all know this year compared to last year. Last year cash generated approximately $7 million of political advertising revenue in the third quarter compared to approximately $1 million this quarter.

Okay, thanks. So then when will we expect to sort of lap the negative impact of that agreement? Was it just in this quarter or?

Yeah. For the point I just mentioned to, I'm sorry just to be clear, that was in Q3 of last year comparing it to Q3 of this year 2015.

Okay, perfect. That's helpful. Just to confirm the iHeart Music Festival, was that in the same period last year?

Yes. It's always in the third quarter of each year.

Okay. Were there any other timing related swings that might have impacted that or was that a clean comp?

No. Nothing on the iHeartMedia level, it's a clean comp.

Okay. And then can you help us – how do you define excess liquidity with respect to bond repurchases, and do you intend to repay the ABL with the proceeds – presumably with the excess cash flow that you generate in the fourth quarter?

Okay. I think two very different questions. I think excess liquidity is a bit of an abstract but it really is, do we feel comfortable spending cash that we have to repurchase debt out in the future in a way that doesn't create a liquidity event between now and then. Because certainly if we wouldn't want to accelerate any kind of liquidity concern and so that's really how we define excess liquidity. I think a great example is the action we took at the end of last year whereby we had visibility into a liquidity event. It was the tower monetization so we were comfortable at that point in time expending excess liquidity. Had we not had visibly in that transaction, I'm not sure we would have done. With respect to the ABL, it depends on a number of things. I wouldn't just naturally assume that we're going to draw and repay the ABL in the first and third quarters and I guess repay in the second and the fourth. I think it depends also on what other cash we have available and where it's available. And certainly that's where we have greater liquidity pressure because of the larger interest payments that happened during the quarter. But we have cash that sits in unrestricted subsidiaries. And if there's investment basket to be refreshed, we'll pull cash out. And if we feel like we are re-characterizing cash in a negative manner, we may be more inclined to use the ABL. Now, to offset that, there is a cost to using ABL. I think it's 200 basis points spread to LIBOR, so it's an inexpensive source of financing but it's still incremental cost versus using cash from the balance sheet. So I think we have to weigh the facts and the circumstances at the time and make that decision. What you've seen so far this year is to draws in the quarters where we've had net-large interest expense and repayments would have been when we didn't. But I don't want to say that is an indicator of how we'll behave in the future.

That's helpful. I appreciate it. And one last question from me, just actually back on the iHeart TV deal with the CW network. Could you talk a bit about the process by which you chose CW? Was that competitive? Did the other networks bid for that business?

For this, for the CW, it happened to be a renewal. But by definition, we're looking for the right partner that first and foremost is going to be – help drive our profitability and give us the maximum benefit for our stakeholders. That also works for them. And what I would point to by when you think about competitive, if you look at the iHeart Music Awards we're now going to put that on – we're now with Turner this year, TBS and TNT, which is that first weekend in April sandwiched in-between the semifinals and the finals of the NCAA. The prior years that was on NBC, prior to year NBC was a great partner. We were able to win prime time for them those years, first year even during sweeps we won, so obviously they were very, very pleased with that partnership. So you can imagine the terms that work for both of us for TBS and TNT that we were able to move it over to those guys and they will now be great partners there, so there are always competitive bidding processes. And just make sure we line up with the right partner for them, our demographics with the see - they line up very well. So it's important for them.

Thanks very much guys.

And our next question comes from the line of Marci Ryvicker, please go ahead.

Good morning. This is Stefan Beson on for Marci. I had a question on pacings and then one on the larger business as a whole. You had mentioned that Americas was up 3.6% but there was a $3 million booking that wasn't going to recur. Is that included in the 3.6%, or do we need to adjust for that?

It's not all included. So November, December booking and I said it was a just to be clear 3.6% and excluding Latin America was up 2% and just for as always, for total transparency just wanted you to know that that was coming. That was in last year's numbers.

Great, no problem. And then on the larger business, do you guys have any interest in expanding transit maybe in particular the New York MTA contracts? Any thoughts there?

Look, from us, from an outdoor competitive stand take, we are always looking to get good products that meets need for the advertisers, so I'm not going to comment on any one particular discipline but for the focus is, we're always looking for ways to reach younger audiences out there. We've had a bunch of great successes with startups and campaigns around Tom's and Hourly Nerd and Snapchat and things like that. We just did a great Share a Coke campaign that I think I spoke a little bit about in my opening remarks using the Times Square digital board that was activated through Twitter. So I think we're being super creative but what it really is, is looking for and bidding on things in particular that gives us the opportunity in outdoor, that place in the trend of the mobile consumer particularly in the integration of the social and mobile elements. It's really interesting. Now with Bob McEwen on board, I mentioned both in the last sales call and this one and running on national efforts, and again Bob was with us before at iHeartMedia then was with another company, has come back for us. What he's finding in his overall client discussions is everybody's looking for better targeting and insights that are available with mobile data as you get all the share shift that you all know about on the call from TB. And our ability – I think what people don't realize we have the ability with outdoor applying these digital insights to the physical nature of our Clear Channel Outdoor board is a giant topic with key partners, key advertisers, looking to have better targeting and attribution opportunities. Do that and then have a digital medium so they work in tandem. So we're are as excited about the outdoor business and Bob's role there as we can be and the future.

Got it. And then on the small cell deployment, is there any kind of timeline that you might be able to share with us? Are we talking multiple years?

It's early days. We are excited about it, we have a great partner in Vertical Bridge. We partnered with the Vertical Bridge guys on the towers deal. And the small sales stuff I know everybody's talking about, the other companies are talking about it, but it is – it really is as we look at our 640,000 boards displayed around the world, it's really too early to make a call how that's going to really be transformative or not. It's an opportunity both from the technology perspective, the business model. It's a great way for us to create new revenue streams and maximize another way to maximize our existing asset base. But having said all that, it's really very early days.

Got it. Thanks so much.

Our last question of the day comes from the line of Aaron Watts, please go-ahead.

Guys, thanks for taking the question. Just a couple from me. I guess first, Rich, you mentioned programmatic and you touched on that a bit on this call. The industry has had a bit of pricing pressure over the years, what's your view on what programmatic does to the pricing environment for radio going forward?

Look, this is clearly not a race to the bottom. This is about adding value. This is about – if you look what's happening in the world that we all live in and just to take a step back, I'm not sure you could look at programmatic in a vacuum away from everything else. I talked about in my opening remarks the data that's out there that came from Nielsen and really for those of you that have not read the New York Times piece, I would strongly encourage you to go read the New York Times piece which talks about – and really for the first time in my career where – which is definitive about old is you've see a lot, is the fact that television is no longer the mass reach media. We're at 93%. Television is at 87% or so. And then when you go to millennials, we're still at 93% and television is like 75%, 74%, 75% out there. And I think that smartphones is at 80%. So I think it kind of starts with the fact that we really are in North America the last reach beam out there. The second thing is there's going to be and I covered this briefly in my remarks, but it's worth repeating. There are going to be three in our opinion – there are three great large platform companies out there in North America. It's going to be Facebook, it's going to be Google, and it's going to be ourselves with our reach of 245 million people and our ability, and our listening on broadcast we mentioned we're up about 10% for this year on broadcast. We're up more overall on listening on digital. The numbers have never been higher in terms of the power of sound.…

That’s helpful. And then just maybe as a tack on to that. My second question was as I think about your top line growth, you're making good progress on digital and your events business. But the core radio broadcast business obviously remains a little challenged on an industry basis. How do you grow the business profitably or should we assume margin compression as revenues grow in the future?

No, you shouldn't assume margin compression. I think as you go back over the last couple of years and quarters and if you look at both Bob and I assisting over time and how other companies have been, we are laser focused on bringing more dollars to the bottom line and having margin expansion. And just as a reminder in 2014, as we focused on efficiencies and prepared allocation of research to iHeartMedia, an increase in operating revenue leverage, excuse me I can't even speak English, we delivered significant margin expansion kind of the second half of that year. In the third quarter, and you're going to see this periodically in quarters, we had continuing to grow in the full year effective some of our ads we made last year on our national digital team. We had some barter and trade stuff and we had contact course out there. And the other thing I would say is just, I don't think I covered it on this quarter, but I've said this before. The lines are continuing to blur. Forget about our lines are continuing to blur. We have to meet the needs of our advertisers. We have to meet the needs of our advertising agencies. Their lines as they look at buying whether it's national, local, broadcast, digital, you look at all those lines out there, those lines are continuing to blur. And when our advertisers and agencies are going to come back to our line, care more and more about – it doesn't matter kind of where it's bought or how it's bought or what you call it, it's about return on investment. And that's why we're saying that's that simple measure, and the reason why we are so optimistic and I've never been more optimistic about our asset…

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