Ladies and gentlemen, thank you for standing by. Welcome to the 2019 Third Quarter Earnings Conference Call for Clear Channel Outdoor Holdings, Inc. [Operator Instructions]I’ll now turn the conference over to your host, Eileen McLaughlin, Vice President, Investor Relations. Please go ahead.

Good morning. And thank you for joining Clear Channel Outdoor Holdings 2019 third quarter earnings call.On the call today are Will Eccleshare, Worldwide, Chief Executive Officer; and Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings, Inc. In addition, Scott Wells, CEO, Clear Channel Outdoor Americas is on the call.We'll provide an overview of the 2019 third quarter operating performances of Clear Channel Outdoor Holdings, Inc. After an introduction, and review of the quarter, we'll open up the lines 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 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 risks contained in our earnings press releases and filings with the SEC.During today's call, we'll 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 in the financial section of our website, www.investor.clearchannel.com.Please note that our earnings release and the slide presentation are also available on our website, www.investor.clearchannel.com, and are integral to our earnings conference call.They provide a detailed breakdown of foreign exchange and noncash 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 William and Brian comment on them.Also please note that the information provided on this call speaks only to management's views as of today, November 6, 2019, and may no longer be accurate at the time of a replay.With that, I will now turn the call over to William Eccleshare.

Thank you, Eileen. Good morning, everyone, and thank for taking the time to participate in today's call. As we discussed this summer, our vision is to create a unique mass-reach global media platform, delivering our client's messages across our distinctive portfolio of digital and traditional displays.With that in mind, given that it is only our first full quarter reporting our financial results as an independent company, I want to take this opportunity to explain our business, our end market and our plan to execute on our vision and create shareholder value.Not only is 2019 a transition year for us in terms of separation from iHeart, we believe it represents the transition in terms of operating performance as well. With challenging results in our International division this year due to the unprecedented difficulties in our China investment and some contractual non-renewals in Europe, we are optimistic going forward, based on our belief that the market is robust and represents a significant growth opportunity from the difficult 2019 performance we've experienced.When you combine this view with our expectation for continued growth in the U.S., which represents approximately 2/3 of our OIBDAN, we are excited about executing a plan that reduces leverage through organic growth, augmented with internal growth investments funded with cash flow.Of course, as we’ve indicated in the past, to the extent an opportunity presents itself to accelerate this positive value and fairly reflects the future value of a business or region, we are open to that as well. We intend to provide more clarity on this plan by providing guidance for 2020 on our Q4 call in February.Please turn to Page 4 of the investor presentation. We have 4 key pillars that are guiding our strategic decision-making. The first is growing inherent strength of the out-of-home medium.We continue to see…

Thank you, William, and good morning to everyone. It has certainly been an eventful quarter for our business segments, and it was also a very productive one for our financial team as we completed a series of Capital Market initiatives aimed at strengthening our financial position.I'd also like to echo William's optimism about our opportunities going forward in a robust market with significant growth opportunities above and beyond the challenging 2019 performance.First, I will review our third quarter results, followed by a review of our capital structure. As in the past, during our GAAP results discussion, I'll also talk about our results adjusting for foreign exchange. We believe this improves our comparability of our results to the prior year. I will refer to these results as adjusted revenues, adjusted expenses and adjusted OIBDAN.Our results this quarter reflect a continuation of what we saw in the second quarter, 2 very different stories. The Americas segment continues to deliver strong growth while our International results continue to be impacted by the substantial decline in revenues from Clear Media Limited, our investment in China.Consolidated revenue decreased 1.6% to $653.4 million. After adjusting for the impact from movements in foreign exchange rates, consolidated revenue increased 0.6%. The 0.6% increase in adjusted consolidated revenue is due to the 8.2% growth in our Americas segment, partially offset by the 5.8% decline in International.Consolidated operating income was down 6.8% in the quarter to $47.7 million. Adjusted consolidated OIBDAN declined 5.3% with the growth in America's offset by a decline in International, primarily due to China.Moving on to Slide 10, I will discuss Americas' results. The Americas business had a very strong quarter, with a revenue of $328.3 million, up 8.2% over the prior year. This positive growth was driven by improvements across all of our channels, with…

Thank you, Brian. The long-term outlook for our company is strong as we continue to lead the tech-fueled transformation of the out-of-home medium and fully capitalize on our global footprint to deliver measurable results for our advertisers through our innovative services and capabilities.The initial steps we've taken to address our capital structure and reduce our net leverage are having a positive impact as we benefit from improved cash flow and enhanced strategic flexibility.The fundamental strength of our industry combined with our strategic investment in digitization and data analytics will allow us to focus on optimizing our performance and creating enhanced value for our shareholders.We look forward to updating you on our plan and ongoing progress. And now Scott Wells will join Brian and myself in taking your questions.

[Operator Instructions] Our first question comes from the line of Kannan Venkateshwar of Barclays.

Hi. Just a quick question. Basically, when you think about this particular quarter, it looks like there's been a lot of strength across the entire Outdoor segment, including UK's. In terms of growth variables, if you could just help us understand how the variables this year are different versus prior years? Is there any new cohort of advertisers that you guys are seeing?And within your numbers, is there - if you could just help us think through different categories like transit, for example, and billboards, in terms of where the strength is coming from. Thanks.

Thanks for the question. It's Scott Wells here. And I'm going to answer this from a US perspective, because I think that's what you're primarily thinking about here. But if you want us to expand internationally, I can hand it to William at the end.It has been a good year for the category. This is something that we have spoken about for quite some time in terms of the opportunity in out-of-home. It is under-invested in as a media category within the United States relative to other markets around the world.And at least part of what's going on is money coming in reflecting that. I think the thing that has been unique about this year, from our perspective, are that we have seen really good growth across all channels in all product lines.So you've seen the national advertisers spending more and you've also seen the local advertisers spending more. We've seen growth in billboards, we've seen growth in transit. Digital has, obviously, been very, very strong for us across the portfolio. And these things are being impacted by the moves that we're making that William referred to on the call, things like adding data via our RADAR tool set, things like trading programmatically.But they are also being driven by things that are happening in the larger advertising market as well as you see out-of-home getting a lot of attention from the thought leaders in media.And there was a very interesting study done by Facebook in Europe and South Africa that demonstrated the impact of adding out-of-home to a campaign, where you saw the reach of the campaign expand substantially.And when you have competitors, and we certainly think of Facebook as a competitor, putting forth studies that demonstrate the efficacy of your medium, your -- you take that seriously and you…

No, my question was broadly around the U.S. numbers, because that's been a trend across all the U.S. peers as well. I do have a follow-up on the US business though, which is on the EBITDA side, you guys are growing - I think your growth was the fastest amongst your peers.So we just - is there something you guys are doing differently versus the others? If you could just explain if it's just a function of maybe the mix? Or if there's something on the cost side? And how should we think about this going forward. Thanks.

Sure. No, thank you for that question as well. The -- I can't really give a detailed bridge between us and our competition. But the drivers in our case -- this business has a lot of operating leverage.When you see the growth coming -- and again, I mentioned before, it's coming across all channels. But when you see growth differentially in the digital part of it, that's a good margin business in general. It does vary depending on a lot of circumstances. But seeing strong growth in digital will typically lead to a pretty good operating leverage.I mean, frankly, it's a focus area for us. We spend a lot of time thinking about how we keep our costs very modest and we keep our cost structure focused. So I think -- if you heard me speak in any of the investor conferences, you'll hear me say that when we start getting up into the mid-single digits of growth, you should expect that we're going to be seeing good operating leverage in this business, it's the nature of the mix.There really wasn't anything particular about our product mix in Q3, other than that digital comment that I called out in terms of something growing substantially fast. And in terms of moving forward, I mean, I think that we fully expect the operating leverage relationship to hold, and that as we see good growth rates at the top line, we'll see good growth rate at the bottom line.

Thank you.

Your next question comes from the line of Steven Cahall of Wells Fargo.

Thank you. Brian, maybe a couple for you. Maybe to start off with if you think about where rates are now, what's your expectation for foreign exchange pressures next quarter -- or fourth quarter? And then at the current rate, is there a point in 2020, when these really abate or even turn into a tailwind?And then I thought your comment on the buyback or a potential buyback was interesting, so based on where the stock price is today, can you just tell us the way that the company is thinking about putting the incremental free cash flow to debt reduction versus the value of your own shares?

Sure. On the first one, I don't have a lot for you. We don't typically comment on foreign exchange. I know it's a modeling issue. But we don't put in balance sheet hedges, and we don't provide guidance on foreign exchange. And so perhaps offline, we can talk a little bit more about how we think about it, but it's not something we generally comment on, on the earnings call.I want to spend a little time talking about the share repurchase comment. I think we just have to think about the best return for our shareholders. And as we look as a team across all of our investment opportunities, given where our share price currently is, it's something that has to be considered at some point. We're not announcing the share buyback program today, we don't have one in place.But ultimately, the company and its management needs to look at all options to create shareholder value and given where our share price is today, it's certainly something that we'll have to keep our eye on going forward.So I'll leave it at that. That's probably all I should say. Again, we have no program in place. But it's just something we're looking at and something we have to compare and then use as a benchmark against all the other investments we're making.

And then maybe just a quick follow-up for Scott, you all talked a lot about the pie growing in Outdoor as a channel versus your share of the pie. So between what's going on with digital and RADAR versus just market share shift, how do we, kind of, characterize the strong growth you've had this year, between those two buckets?

Sure. I mean, I think that if you look at the year-to-date, and certainly nobody has reported on Q3 yet, we've been growing just a little bit faster than the market as a whole.But the market is pretty broadly defined in that it includes very small screens in place spaced all the way through our large roadside format, so it's a diverse mix of products that goes in there. But we've been growing faster than the market by a little bit, in that regard.So that is a part of it. I think the drivers underneath that come down to our investment policy, the places that we're doing digital conversions, the new airports that we're picking up, things along those lines. Those have contributed.This has not been a particularly big year in incremental inventory. But we have been steadily adding capacity through our digital conversion plans, and we feel good that we're choosing strong locations to do that.And I do think that the programmatic and RADAR investments are things that are helping us in gathering share as it goes. So it's a blend of things that are pure market-driven versus initiatives. Does that answer your question?

That does. Thank you very much.

Your next question comes from the line of Lance Vitanza of Cowen.

Hi, guys. Thanks for taking the questions. I guess, first I wanted to ask you on the corporate expense. It came in about $5 million higher than we had modeled. And in fact, it was up a little bit year-over-year. Given that the ending of the royalty payment, we'd expected corporate expense would be down year-over-year.I'm just wondering if 3Q was a blip or are we just fundamentally misunderstanding something and need to adjust our thinking going forward?

I don't know that I'd call it a blip. It did have a significant amount of separation costs. I'd call it around $5 million. Maybe something that, I hate to say, not recurring, but it's something that won't continue to exist forever are some significant investigation costs. We've incurred some costs as it relates to operations in China. We have incurred some costs as it relates to Italy. As those close out, those will go away. They are about $4 million.So I think if that is helpful to you that may account for some of the differences. Ultimately, we'll wind up those investigations and those costs will go away. But we have a significant amount impact to corporate expense this quarter.

Very helpful. And, I mean, if I could, just a follow-up. Can you just comment, Brian, further on the new metrics that you plan to feature beginning with the fiscal -- with the 2020 guidance?

Yes. We haven't finalized the decision at this time, but we have looked at what our competitors provide and what would be most useful to the investment community. So I would expect beginning in Q4, we'll have some version of a free cash flow metric along with some type of adjusted EBITDA figure that's more helpful, I think, to the investment community.

Okay. And then just to clarify, last for me. Just could you clarify the comment you made regarding free cash flow of $100 million and leverage down to 6.5x by 2021? And I don't remember exactly how you phrased it, was that by the end of 2021?

That's correct.

And does that comment the end of '21 refer only to the 6.5x leverage? Or also building to the $100 million of free cash flow?

It's both. I think yes, as we continue to invest in accretive assets and continue to grow this business organically that if we operate to plan, and we are successful in refinancing the 9.25% notes, which are callable in February of 2021, that we can reach a free cash flow number in the $100 million range and have leverage down to 6.5 times by the end of 2021.

Okay. Thanks, guys. Appreciate it.

Your next question comes from the line of Marci Ryvicker of Wolfe Research.

Good morning. It's Stephan on for Marci. I was hoping you might be able to give us a little bit more color on International regions, excluding China, are things typically getting better or worse, anything standing out, in particular?

Yes. Thanks for that. I mean apart from China, I think we had a good quarter in International. We saw excellent growth in the U.K., good growth in a number of other European markets, and a very strong performance in Latin America as well. I mean across Europe, I would say, we feel particularly good as we go into 2020.And we see the Paris contract coming online from the end of this year and very strong plans for the International business, particularly in Europe for 2020 and beyond. So it's really -- it's the China issue that is affecting and impacting on the overall International position as we stated in the statement.

Understood. And I was wondering if you could put a little bit of a finer point on the guidance for Q4 in Americas? I know mid-single digits to high single digits for the second half, but given the Q3 results that kind of leads us anywhere from, kind of, low single digits to high single digits on a revenue line, and a little bit of deceleration on OIBDAN. Is there any additional color you could give us there for the fourth quarter?

Yes. I don't know that I want to give a whole lot of additional color on the guidance that we were thoughtful about providing and then affirming. The comps, for the U.S. business in particular, get tougher in the fourth quarter. But I think we hold to our guidance. And if anything, feel more strongly given the range that we provided.

Great. Thanks so much.

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

Thanks. One thing you brought up was the San Jose all-digital airport. I wondered if you could go into that a little bit more. Is this a potential template for testing? Or are you consolidating previously tested concepts? And how broadly do you roll this out into other areas?

Thanks, Jim. It's Scott here. I'll take that one. This program is definitely new to the world on a few levels. I mean, first off, it's 100% digital. Second off, we've gone with a sponsorship model essentially where there are an acre advertisers that committed to be part of the program as we were developing the program. And it was done in conjunction with very strong partnership with the airport.I think there are number of things unique about San Jose that makes it a really good fit in terms of its locations in the tech community, the nature of how the airport flows in that they have a very centralized security. So lots of good flow characteristics as you think about places where advertising can be placed effectively.And it was -- again, it was a partnership that would not have been possible without the vision and ideas of the San Jose team and the airport operating team as well as our team working together to develop it. I do think it's something that we will consider rolling out in other geographies.But I don't think you should think that this is what our airports model shifts to 100%, just given some of the characteristics of the physical plant in San Jose and also the nature of the advertiser base in the sort of areas surrounding San Jose. Hopefully, that gives you some color on it, Jim.

Yes. And it does sound more unique to that area. Although one -- I have another, sort of, question, but one related to that potentially. You also talked about doing more with the movie industry. And I wondered if in the areas where you can add full motion video, say, in a fixed location like with the theatrical sector or the studios provide movie trailers or even trailers adapted to a specific location as one of the areas where that might be another opportunity for you?

Yes. I mean our asset base that can do full motion video is fairly limited. Airports is definitely one of the areas where it fits. I mean, I think, with that category of advertiser, like all advertisers, they're trying to hit the sweet spot between how the assets overlap with their audience and how the use case fits.They have a variety of places where they're able to do the, sort of, trailer-type advertisement, and we've certainly done that in places like Times Square. I'm not sure if airports would be a priority area for them, but it's a possibility.

Okay. And one other area. It sounds like the -- mostly the compression in the International sector margin related to China. And you talked about value-creation priorities. I wonder if that also includes considering divesting the China position? I think we've talked about this in the past.And I understand it's a large and growing market, but is the combination of a large, fully consolidated exposure but potentially less control on your part, especially in the challenging environment, the type of fit you really want to have?

Yes. I mean we're, obviously, looking very hard at the China business. At the moment, it's no secret that the China economy is going through a bit of a readjustment at the moment. And GDP was the slowest for 30 years last quarter.So we're looking closely at our investments in China and looking at every option going forward, but no news at the moment.

Okay, thanks very much.

That was our final question for today. I will now return the call to management for any additional or closing comments.

Okay. Thank you very much, and thank you everybody for joining. Obviously, 2019 was a very important transition year for this business. As I said at the start of the call, we have very exciting plans for 2020 and beyond, which we'll be talking about on our next call as we give you guidance for 2020, when we get onto the Q4 earnings call early next year.So we remain absolutely focused on delivering shareholder value in 2020 and beyond, and we look forward very much to you joining us on the next call. Thanks very much, everybody.

Thank you for participating in the 2019 third quarter earnings conference call for Clear Channel Outdoor Holdings, Inc. You may now disconnect your lines and have a wonderful day.