Welcome to the 2017 First Quarter Earnings Conference Call for iHeartMedia and Clear Channel Outdoor Holdings, Inc. [Operator Instructions]. And as a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, Eileen Mclaughlin, Vice President, Investor Relations. Please go ahead.

Good morning and thank you for joining our first quarter 2017 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 will provide an overview of the first quarter of 2017 financial and operating performances of iHeartMedia, Inc. and its subsidiaries, iHeartMedia Capital I, LLC; iHeart Communications, Inc., Clear Channel Outdoor Holdings, Inc. and Clear Channel International BV. For purposes of this call, when we describe the financial and operating performance of iHeartMedia Inc., it also describes the performance of its subsidiaries, iHeartMedia Capital I LLC, iHeart Communications, Inc. and Clear Channel Outdoor Holdings Inc. After an introduction and a review of the quarter, we will open up the line for questions. Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements. These statements include management's expectations, beliefs and projections about performance and represents management's current beliefs. There can be no assurance that management's expectations, beliefs or projections will be achieved and that actual results will not differ from expectations. Please review the statements of risks contained in our earnings press release 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 orders booked at a specific date versus the comparable date in the 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 the earnings conference call presentation which can be found on the Investors section of our website, iheartmedia.com and clearchanneloutdoor.com. Please note that our 2 earnings releases and the slide presentation are available on our website, www.iheartmedia.com and www.clearchanneloutdoor.com and are integral to our earnings conference call. They provide a detailed breakdown of foreign exchange and non-cash compensation expense items as well as segment revenues, operating income and OIBDAN, among other important information. For that reason, we ask that you view each slide as Rich comments on it. Also, please note that the information provided on this call speaks only to management's views as of today, May 4 and may no longer be accurate at the time of replay. With that, I will now turn the call over to Rich Bressler.

Thank you, Eileen and good morning, everyone. Thanks for joining us. As a true multiplatform 21st century media and entertainment company, we're leveraging our leading broadcast radio, digital, outdoor, global, social, live events and data 2 businesses to continue to innovate for the benefit of our advertising and marketing partners. In the first quarter, our consolidated revenues declined. However, adjusting for the sale of new outdoor U.S. markets and international businesses in addition to foreign exchange, our revenues increased, with all 3 segments driving growth. Operating income and OIBDAN were down. At our iHeartMedia segment, this quarter marked the 16th consecutive quarter of year-over-year increases in revenue. We achieved that result in what is turning out to be a slower-than-expected ad market for traditional media companies. We believe that our ability to generate this revenue growth was driven in large part by the investments we're making in innovations, including our digital and data products and platforms that strengthen our business. Before expanding on our first quarter financial performance, I do want to highlight the strong fundamentals of our core businesses and several of our exciting new initiatives. As you know, based on reach, iHeartMedia is the #1 media company in the U.S., with a total of 0.25 billion consumers monthly. In fact, only Google and Facebook, among all other media companies, have market reach of more than 200 million. It all starts with the scale and strength of our 850-plus broadcast radio stations. For nearly 50 years now, broadcast radio has maintained its reach of 93% of adults over 18, #1 among all media in the U.S. Meanwhile, TV screens is headed downward, now at 87%. Among millennials, ages 18 to 34, radio reaches 92%, even surpassing smartphones at 91%, with TV lagging behind at 76%. And radio's reach among…

[Operator Instructions]. Our first question comes from the line of Avi Steiner with JPMorgan.

I've got 4 categories I'd like to touch on. First one is on expense growth, clearly well above trend this quarter and I'm curious if you can talk to how much of that may be related to the retention bonuses, related to the work that has gone to the exchange and I think a few thousand pages now, the launch, expenses related to the launch of Plus and All Access and maybe anything related to tax work outdoor and then I've got a couple more.

It's Rich. Again, I'm not going to comment or break out any numbers specifically. There's a lot of things that's affecting our expense growth. There's the timing. As I noted in both the earnings release and the call, of trade and barter costs, these counterprogramming costs, we had particularly on iHeart a number sales initiatives that are driving and quite frankly also as I said earlier, we expected a more robust advertising market. Just to be transparent, we've been a bit surprised by the softness on it. What I can tell you is that Bob, myself and the rest of the management team that we are laser focused both in terms of driving advertising revenue but also making sure that we've got the right cost structure to support the, right sized cost structure to support the advertising environment that we're in and so we continue to focus on that. So that's really on the iHeart side. If you look at the outdoor piece and if you look at international, that's really due much more to seasonality of our revenues but we had lower margins in the first quarter compared to the fourth quarter and we had some higher site lease expenses and some production expenses and we had some new contracts in Madrid and Barcelona. So again, part of that is just timing first quarter versus fourth quarter which is or any other quarter versus the first quarter is always smaller and then we've got some site leases and some new things, new contracts that I just highlighted. And on the U.S. outdoor piece, yes, we've had some builds in airports which has been great, the overall growth in airports but they're also lower margin businesses and they've been able to offset declines in some of the higher margin businesses. Then we also have some contractual increase in fixed site leases. So I think that touches on all 3. And by the way and the other expenses, just when you look at the press release, anything with respect to the expenses on the exchange offer our into exchange offer or term loan offer are in other expenses below the line.

Okay, moving on to topic 2, free cash flow was lower than we had expected. Obviously, there's a variance in EBITDA here but working capital seems to be the biggest and particularly on the AR and increase in prepaid expense lines and I'm curious if there's anything to call out in those categories specifically.

No, I'll let Bryan to comment in a second here but not really. I mean mostly impacted by some accounts receivable and prepaid expenses. As always, AR, accounts receivable, generally kind of first quarter seasonality of our businesses and 2017 we also had a decline in the first quarter because remember we had the sale of our Australian and our Turkey businesses in 2016 which also affected the decline in first quarter working capital and prepaid was up as just at the timing of payments.

Rich said working capital of the first quarter I think most people know is our weakest operating quarter. It's also a quarter that has a disproportionate share of cash interest expense. So when you take a look at the cash movement during Q1, you see a typical pattern of cash burn due to that cash interest expense, the working capital CapEx. I think if you compare it to Q1 2016, we had some asset sale proceeds come in so there's a dramatic variance quarter-over-quarter. But Q1 cash interest and low operating performance seasonality, related to seasonality is the main driver there.

Okay, third topic. There's language in the 10-Q around possibly reducing or delaying CapEx in order to have additional cash to meet maturities. Curious if this would be at the Outdoor level or just the parent. I don't think I saw that language at the Outdoor level and how do you feel about that in the context of your strategy of trying to grow in this tough ad environment?

Let me just start and I'll Brian chime in. We are, as we've done for years, there's nothing about go back over the years, we have always proactively worked in our capital expenditures and we're proactively working on our expenses. Our job is to really grow revenue in this environment or tough environment softer than we expected and we have got to manage our expenses and working capital and capital expenditures in that environment. And so we're going to be, moving forward, we'll continue to be nimble and continue to adjust things to meet the environment we're in. I would point out and I think I've up-to-date if you look overall compared to the traditional media companies, traditional radio companies at least as of up to a half hour or so ago and you look at our U.S. revenue, I think for the most part, particularly on the iHeart level, we significantly outperformed both the radio industry and the traditional U.S. media companies on the revenue out there. So not these were advertising revenue is today as a company but we're really proud of our team at iHeart, U.S. Outdoor and International Outdoor how we significantly outperformed the marketplace.

Okay. I'm going to end it on this. The press is reporting that the group is up was a deal in its current form and by your own disclosure in the level participation would seem to be low, very low. And I'm curious as to whether you would consider changing tracks if this persists and maybe look think is built directly in hopes of coming to conventional resolution?

I think you're going to know my response. As you know and this will pertain to all questions with respect to the private transactions that are currently out there, they are private and SEC rules prohibit us from commenting on those transactions.

Our next question is from the line of Jason Kim, Goldman Sachs.

Coming back to the expense side again, I wanted to ask from a different angle, you had mentioned that you are a bit surprised by the softness in the advertising markets but in terms of first quarter revenues, they were actually not that different from your pacing guidance that you had given back in February. So I'm just trying to reconcile those comments at least with respect to the increases in first quarter expenses and the impact to margins in the context of revenues, actually not being that much weaker than at least what we hear or we had originally modeled and then the follow-up to that, how much flexibility you think you have in terms of bringing back down your OpEx levels to be more in line with the more muted revenue environment in the near term?

Yes, well no, I'm not going into in terms of the guidance and pacing and probably when I see this but Daniel signed in the next appointment I am and so if you look at our pacing and I think we give out we were above the pacings since we give up to iHeart. We were below the pacing information we gave out to the Outdoor business because again, they're points in time and the other thing I would say to be capital about pacings, the business and I've commented I think on a number of previous calls, the business continues to evolve where placement of advertising and I think we're all seeing this in the advertising industry, not only has it been softer I think than many of us expected but also the placement is later and later and later. It's like in terms of the number of sleepless nights I had and I think we all have is because it gets closer and closer to the engagement closer and closer to replace all of our outdoor signs and billboards and digital billboards out there. So quite frankly I think pacings are becoming less and less of an indicator quite frankly what's going to happen [indiscernible]. In terms of the expense side, there's a couple of things. As I said, we are aggressively managing our expenses to balance it with where our revenues at the same time, the transformation to a digital and data rich company for both the radio and the outdoor business, we're looking to capitalize on the benefits of the demand for the mass reach media and the world of the dwindling TV that's out there. We also have another dynamic [indiscernible] aware of transformation advertising is [indiscernible] and so we're also investing [indiscernible] platform. I commented in my opening remarks about our research analytics tool that we're really excited about it but that the end of the day, we continue to feel very strongly that we've got about 20% or so which I think I also mentioned earlier in the call of people spending time are only getting 6% of the advertising revenue dollars that are spent out there. So we have tremendous opportunity, tremendous upside and we believe that with our audience size, investing in programmatic we've got a unique position with our advertisers in both radio and outdoors, that will open up significant digital revenues as we go forward. So we think we've taken all the right steps and like I said, we were just a little surprised overall it at one point in time about the softness in the advertising environment.

Got it. And then if I can just follow on to the ad environment again, any big differences between national and local? I think you did call out national but I was wondering if there was any in terms of percentages anything like you can share with us?

Yes, I'm not going to break out any of the individual percentages. Clearly, our national business has been stronger. It has been stronger than our local business and again, I think if you look at some of the earnings releases that came out yesterday and even though this morning, when you look at advertising North American revenues, the multimarket revenues in particular for the traditional large traditional media companies, I think if we look at our results as we significantly outperformed them. So nothing beyond that and I'd say local's been a little bit softer.

Our next question is from the line of David Phipps, Citi.

Following on the advertising, can you talk a bit about qualitatively about which geographies or which categories that you're seeing softness across all the different platforms within iHeart? Or maybe you could characterize them us was going to [indiscernible]

I'm not going to quantify each of the individual categories. I will say clearly we've got some great partners. I called some of the [indiscernible] release on AT&T has been terrific and I mentioned with in my opening remarks, that country music festival that we're working with them on. We've got our initial pool party for the summer that we're working with them on. Cap I has been a terrific partner and so we have a number of QSRs that have been very strong partners for us in the industry. Entertainment industry has been very strong pretty much across the board. And I say the other side of that is as you'll notice if you look at the results that came out in the last 20 years to automobile industry continues to be great partners significant piece of our revenue but I think if we just look at anything the other manufacturers are down 6%, 7% overall in the first quarter sales so it hasn't been quite as robust on the auto side as it has been in the past. But overall it's a mix out there of pluses and minuses and I'm not going to individually comment on.

And as you look at geographic basis, does it make much difference where it is in the U.S., where your radios operate or where the billboards operate for some of the advertising or is it sporadic, is it anything broader than that?

No, it's really different down to the individual cities. Some areas, we're clearly benefiting by travel and tourism and home building improvements and again, if you kind of watch what's happening, if you take a step back and almost remember what our job is what we fundamentally do as a company, we connect the rent our relationships with our consumers and advertisers. Think about it. It's that simple. So if you look at things like travel and tourism and home building and things like computers and I mentioned media industry and things like the industry and if you think about places in the U.S. geography that benefit there is stronger in those industries you could probably come up with your own theory or your own idea us where a cause the company there were stronger based on those categories.

And could you maybe rank some of the biggest categories set up or top 3 of 5 advertises is because we get a lot of questions about the auto insert at this point?

Yes, with auto, automobile got is to be great partners for us and I'm not going to put them in top 3, top 5 but I'm going to say you can judge or you can surmise that auto is a very important category for us in advertising revenue.

And finally, I want to ask this as gently as possible. A lot of investors that I've spoken with have followed iHeart for many, many years have low at this management team has managed well in a tough industry but expenses jumped up pretty significantly this past quarter. How did that happen when you are in the stage where you're looking to do something different with your balance sheet and as you're facing some headwinds so our management team that is consistently done well managing expenses switches and you seem to be way out of trend this time. So what will you say to that?

Yes, you can ask the question gently and I'm fine everyone asked it. We've done and over the years whether it's been Bob and myself and the team here, whether it's been here at iHeart or previous companies that the 2 of us have run, you never look at one quarter or any specific quarter and that's is it a bit here. This quarter, we happen to have a mix of trade and barter costs. We have a mix of investments that we've made in terms of timing and our talent and new contracts. I mentioned I think on the call we just didn't reveal with Elvis but we've got another tenant contracts that were renewing in the first quarter this year. We're investing in things like I said in terms of programmatic a number of other sales initiatives that we've invested in. I think I don't have to repeat myself that I talked about SmartAudio earlier on the iHeart side. But one thing I can assure you and you can take my word for it and you can ask our 20,000 employees in the company we are aggressively managing both expenses, capital expenditures, cash and the balance with the revenue that we see coming in. And revenue was with all honesty the advertising environment was softer just and we thought is going into the quarter and so were taken steps to look at our guidance or revenue environment that we're in.

Just to follow on that, will some of the expenses reverse themselves in the second quarter you were most of it is some.

I'm not going to comment on anything other than I think the benefit about being our team the benefit of being around the longtime this business is you can look at credibility. to begin look at track is 30 and so I wouldn't look at one quarter or 2 quarters are in the individual quarters as a sign of anything other than what I've said before about the investments of the business, the mix of the a little surprised by the softness that we saw in the advertising environment and you balance that with our aggressive management of our core space against the revenues that we see coming in working capital and capital expenditures and I think we've done that for years and years.

Our next question comes from the line of David Farber, Credit Suisse.

A number of my questions have already been asked. But I guess I wanted to touch base on the cash balance operational stuff has been asked. This could be maybe a question for Brian but I'd be curious to hear how you guys feel you're navigating of the cash needs and what you're doing to improve liquidity perhaps given the '17 receivables maturity and now the way cash burn versus the their desire perhaps to find a working deal with creditors and I have one follow up.

Sure, I'll try to respond to the question, David and if I get off-track maybe let me know. But I think with respect to how we manage liquidity, the focus is first and foremost continue to focus on operations and thus let everybody else in the company other than the end of the treasury team. With respect to what we can do in finance and treasury, we've disclosed and talked about the need to refinance or extend the ABL. We are in a period of time where are they things are going on and so we have to take the sequencing of that transaction within the context of everything else that's going on. We have additional disclosure about managing CapEx and other spending, with rich has addressed some of those things. But most significantly is the company's proactive steps that it's taken to address our capital structure and we can go to a lot of detail about the information is out there. We have worked quite diligently to put forth offers, generate dialogue and we hope to continue to do the things that we need to do to address the capital structure. Because at the end of the day, the focus on operations, addressing our significant debt levels and cash interest expense and ensuring that we have liquidity to fuel the business are our top priorities.

Okay, I just want to tackle this SG&A investment again. It sounds like you guys are not giving a tremendous amount of color about how we think about the balance of the year just to continue. But I guess maybe said a different way, would you be able to help us understand if there was investment made in this? Do you expect to return on this given the amount of time you've benefited the business. I'm curious if there was any example perhaps more color you could give us on what types of investments they are in how we should be thinking about them perhaps as a return for point it? Any additional color around understanding the SG&A would be great. And that's it from me.

Yes, it's Rich again a couple different times let me start by first saying we always expect a return on every dollar I put out in this company. So fundamentally, we're about numbers and data and bottom line results. Secondly, just to be clear, a couple of different times is we're not managing the company for one quarter and I think if you go back over the last number of years, I don't think anybody would accuse us in terms of being wallflowers about matching expenses and at the same time it is significantly outperformed as I said whether it's the radio industry or the other traditional media companies and quite frankly if you look at our margins compared to one of those companies, we've significantly outperformed those. The third thing I'd say is just again and hopefully in terms of color and being transparent, I talked about and we talked about in the earnings release and I talked about this morning in my remarks that the mix of revenue this quarter with trade and barter and then you add to that the investments [indiscernible] SmartAudio and programmatic and other sales initiatives which we have to make in terms of continuing to evolve the business in terms of where the industry is going and then you couple that with a softer advertising market and we will thought we are going to have an again just look at the other companies that are announced, we significantly outperformed are actually down significantly in revenues on organic revenue on a year-over-year basis. But I can assure you that we are active proactively managing expense base to take into account what the revenue growth is.

Our last question is from Aaron Watts, Deutsche Bank.

I just have 3 quick ones. I guess, Rich, just curious if you can clarify how much of the drag on radio pacings for 2Q is specifically due to the timing of the Awards Show or how much of it as we go.

Yes, it's a good question but I don't think is significant. The thing again I'd emphasize with pacings, I can't emphasize this enough is ideal volatilities from a word but the week to week change of new guys I know you'd like to see the week-to-week pacings but the week-to-week pacing change in this business is probably more dramatic than you think anything is probably for all the advertising industry and all the advertising businesses. The placement of advertising close and closer to the ARD and as I said, I'm like a broken record on this but pacings quite frankly dubious much less of an indication as to what this really happening in the business is of an ever been and appeared be somewhat years in the new businesses.

And maybe on that note just bigger picture, are you getting any sense from your advertisers have in are they sitting on their dollars are they putting those dollars to work in other media and match costing the softness for you specifically?

I think advertisers, I think there's a lot of things happening in the advertising world. I mean you so we also what the Google numbers that came out a week or so ago Facebook when you say numbers last night obviously, they had very strong revenue growth out there. And as I said, we continue to significantly outperform both the radio industry and the traditional media companies from a revenue standpoint. So I don't think that the advertising market having said that is soft. It was softer than we thought it was going to be. And I think we look at the data that's out there this coming autumn consumers this coming off consumer spending and the numbers are the economy has been weak so we all see the same stuff really am not going to speculate at it with people are sitting on or those allocation of 2 the big digital players out there but I think we're really proud of our team, our management team both at iHeart and the U.S. outdoor in the International Outdoor business for the market share that we've been able to take with the dollars available. Having said that, we are still wildly, wildly undermonetized compared to the share of audience that we have, whether that's on the radio or the outdoor side and our job is to close that gap and that's what Bob, myself and the rest of the management team that's what we do and I assure you that 24 by 7, we're trying to close that revenue GAAP and again manage the expense base with what the revenues are going to be.

Last one for me and I appreciate again the time. I recognize it's early days but can you talk about your initial experience in terms of the uptake of your enhanced and subscription offerings on the app and's or any realistic target we should think about in terms of percentage of your registered users you think you can get to ante up the premium offerings?

Yes, I mean, look, I'm not going to give any specifics on that. I mean we're really pleased with iHeartRadio Plus and iHeartRadio All Access all our on-demand services. I think when you think about it is a good example of our get additional products and value for our listeners while also introducing new revenue streams and the significant service recently launched include the adoption of the services in line with our expectation that's out there. I say the financial impact is immaterial. But again, it's just another good example of our team here and the ability to launch that product, our relationship with the radio industry start the music industry partners us to make the services available out there for our listeners. And so far, everything has been in line with expectations and the reception has been great.

Operator, we're going to conclude the call for today. Thank you for joining us. As you know, Brian and I will be available to take any calls over the next few days that you may have. Again, thank you again. Have a good day.

Ladies and gentlemen, this conference will be made available for replay after 10:30 a.m. to day running through June 4, 2017 at midnight. You may access the AT&T executive playback service at any time by dialing (800) 475-6701 and entering the access code 422506. International. [Technical Difficulty]