Ladies and gentlemen, thank you for standing by. Welcome to the 2019 Fourth Quarter and Full Year 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 fourth quarter and full year earnings call. On the call today are William Eccleshare, Worldwide, Chief Executive Officer; and Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings, Inc., who will provide an overview of the fourth quarter and full year operating performances of Clear Channel Outdoor Holdings, Inc. for 2019. After an introduction, and review of our results, we’ll open up the lines for questions. And Scott Wells, Chief Executive Officer, Clear Channel Outdoor Americas, will participate in the Q&A portion of the call.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. Additionally, when we reference our business in China, we’re referring to our 51% investment in Clear Media Limited, a public company that trades on the Hong Kong Stock Exchange.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, February 27, 2020, and may no longer be accurate at the time of a replay.With that, please turn to Page 3 in the presentation, and I will now turn the call over to William.

Thank you, Eileen. Good morning, everyone, and thank you so much for taking the time to join today’s call.Now please turn to Slide 4 in the investor presentation. As many of you know, 2019 was a transformative year for Clear Channel Outdoor, as we separated from iHeartMedia. In the 10 months since we separated and became an independent publicly traded company, we have strengthened Clear Channel’s capital structure, delivered exceptionally strong results in our Americas division, which now accounts for about 70% of OIBDAN and delivered 7% revenue, 16% operating income, a 9% OIBDAN growth in 2019 and established a new path forward, which we believe will position the company for long-term success.These achievements could not have been accomplished without the contribution from our teams around the globe. Through their unwavering dedication, talent and hard work, they’ve positioned us to achieve our vision. As a unique mass-reach global media platform that delivers our clients’ messages across our distinctive portfolio of digital and printed displays, we’ve been able to capitalize on the expansion of the out-of-home industry, particularly in the U.S. as well as in some of our largest international markets. We believe the strength in these key markets is the result of the progress we have made on the four key pillars of our strategy: growing the out-of-home medium, technology leadership, customer focus and opportunistic expansion.Please turn to Slide 5. And we have good reason to be optimistic about the out-of-home industry. Based on data from Magna in 2019, the U.S. out-of-home industry increased over 6%, the UK was up 8% and the global market grew 6%. And the industry outlook is strong as well. Magna believes out-of-home will continue growing faster than traditional media and digital out-of-home will grow faster than online advertising. Globally, out-of-home is projected to grow…

Thank you, William, and good morning, everyone, and thank you for joining our call this morning. As William mentioned, it has certainly been an eventful and transformational year for the company, and we are excited about the future. We believe we are taking the right steps to strengthen our capital structure and provide strategic flexibility to deliver strong results, while continuing to invest in our business. And as William stated, we remain open to all options to strengthen our balance sheet, including possible dispositions, to the extent that any potential transaction fairly reflects the future value of the business or region.Moving on to the results on Slide 9. As in the past, during our GAAP results discussion, I’ll also talk about our results adjusting for foreign exchange. We believe this improves the comparability of our results to the prior year. I will refer to these results as adjusted revenues, adjusted expenses and adjusted OIBDAN.As I mentioned last quarter, this will be the last quarter we use OIBDAN. In 2020, we are transitioning to a new reporting metric replacing OIBDAN with adjusted EBITDA, as we believe this metric is more useful to the investment community. A full reconciliation of adjusted EBITDA for each quarter and the full year 2019 is available on Slide 22 and 23 in the investor presentation for your reference. However, the difference between these two metrics is restructuring and other costs, which had been included in OIBDAN but are not included in adjusted EBITDA.As we have seen throughout the year, our excellent results in the Americas have been offset by a decline in International, due to the impact of the continued weakness in China’s consumer economy on Clear Media Ltd’s. revenue and OIBDAN. In the fourth quarter, consolidated revenue decreased slightly by 0.3% to $745 million. Adjusting…

Thank you, Brian. I continue to be confident about 2020 and the long-term outlook for our company. As Brian stated, we anticipate our Americas segment will deliver mid-single-digit growth in revenue and mid- to high single-digit growth in adjusted EBITDA. That is growth on top of the 7% revenue and 9% OIBDAN growth that we delivered in 2019. We have a unique value proposition as a mass-reach medium and are confident in the fundamental strength and growth drivers in our industry and our ability to capitalize on them. We're focusing on driving continued revenue growth, by building out our technology capabilities through platforms like RADAR as well as our programmatic offering.Through our investments, we are continuing to improve audience insights and data solutions to unlock significant value as well as empowering clients with a level of flexibility closest to online platforms among traditional media. At the same time, we continue to be opportunistic about chances to further strengthen our capital structure and reduce our net leverage. This may include potential dispositions, if these transactions provide us with greater financial flexibility to further invest in our higher-margin businesses, particularly in the U.S., as we are maintaining our disciplined approach to drive sustainable, profitable value for our shareholders.In short, we continue to recognize the inherent strength of out-of-home as a brand-building medium and are committed to executing our vision to deliver a leading platform in the industry. In 2020, we plan to continue transforming our business, and I look forward to providing regular updates regarding our progress. And now, Scott will join Brian and myself in taking your questions.

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

This is Dev here on behalf of Kannan. So one question for Will, and then I have a follow-up for Brian. So Will, can you help us compare and contrast the U.K. and the U.S. digital markets. We're just trying to understand from a longer-term perspective, is it possible for the U.S. digital penetration to be reaching something like the U.K.? Or are there any structural differences in that market that we should be thinking about?

Well, there are both structural and format differences, I would say. And thanks for the question, Dev. I mean, I think the U.S. digital market is the large-format market, whereas in Europe, we are, generally speaking – talking about a smaller format roadside digital, the two square meter signs. And the real difference in terms of penetration of screens is around permitting and availability of sites to convert to digital in the U.S. So they are – they're structurally different in terms of the way the markets would operate. So I don't think you can directly compare them either the way, in which the markets operate or indeed the format that we're operating.

Shall I add one thing on that, William?

Yes.

It's Scott here, Dev. William is exactly right on the regulatory aspect. But I think we have mentioned this on prior calls as well. We do have markets, individual markets within the U.S. that are north of 50% in terms of digital revenue. So, the ability to get to those kind of levels, is certainly not something that's impossible here. The issue is one of the ability to get the permitting and the ability to convert the quantity of assets.

Okay, got it. Thanks, William. And then one for Brian, I think one thing which I'd like to understand is how much flexibility you have both in OpEx and CapEx in case the coronavirus spreads more broader and in the U.S. and Europe? And how should we think of the margin profile in that scenario?

Well, look, we have a great deal of flexibility in CapEx. There's a certain amount that could be committed due to contract concessions that you won previously. But by and large, a significant percentage of the CapEx is discretionary. And so you can see us manage that. In fact, we excluded Clear Media's CapEx guidance just for that reason. I think in this current environment, they're going to be – they're separate publicly traded company. I don't want to speak for their behalf, but they're obviously going to be very thoughtful about how they commit and deploy CapEx. We can do the same. OpEx, we manage that on an ongoing basis, and we have to be flexible. We have plans in place. As anticipated economic, macroeconomic changes occur, we need to be flexible, and we have some flexibility there. But particularly on CapEx, a great deal of discretion. The majority of our CapEx is discretionary. And so I think we can have both those levers and can pull them if we need to.

Okay. Thanks.

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

Yes, thank you. Maybe, first, Scott, on the guidance. So let's just say EBITDA is kind of flat to up this year, you've got CapEx going down, I think your cash interest is maybe slightly up and cash taxes may be slightly up. Anything else we need to think about as we're bridging 2020 free cash flow from 2019?

I'm going to interject just for a second because it may not have been clear. When we gave our CapEx guidance, we included – we excluded China, Steven. So I think if you look at CapEx for the remaining business, the Americas and International, it's actually going up. And we do see an opportunity in the U.S. really to invest in the business. So I want to make sure you have the right base. It might not have been clear. But the guidance for CapEx this year excludes China.

Got you. Okay. And then maybe, that leads me to my second question. So but how should we think about the cash that's going into or coming out of China at the moment as that market is under a bit more pressure. Is Clear Media Limited sort of a ring-fenced entity? And how much flexibility do you have on that cash coming in and out of China?

There hasn’t been a lot of distributions from China over the past couple of years. When they were – the historically, there had been, and they go through a budget cycle, and to the extent they've built up cash, they can make an annual dividend. And historically, I can remember a couple of occasions where cash had built up and they made a special dividend. But over the past couple of years, and certainly, given the more recent economic climate, they haven't made distributions to their shareholders, which is how we would receive cash out of China. You mentioned cash going into China, we don't fund China. China has its own separate public company. And while, again, I don't want to speak for them, they are looking at, I'm sure, their liquidity position, they have the same levers they can pull with respect to CapEx and OpEx. And I'm sure they are – the management team there is thinking very carefully about the environment they're operating in.

Great. And then last one. It seems like maybe your comments on potential divestitures or maybe, I don't know, a little mediar than what they've been in the past. It sounds like maybe the pipeline could potentially be a little more active. So any more color you can give there. And if we think about the transaction pipeline, is it a lot of potential smaller transactions? Are there potential for big transactions? Any color would be appreciated. Thank you.

Right. Well, first of all, I would say, I think your interpretation is a pretty fair one in terms of what you said at the start of that question. I don't want to get into any further detail in terms of which markets and whether there will be more and more large, once we have any news on that, you will be the first to know. But as I said, we are continuing to evaluate opportunities to support our growth in the high-margin businesses. I don't really want to say more than that at this point.

Great. Thank you.

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

Good morning. This is Chris on for Lance. Thanks for taking my questions. I have two on China and the tax status. You had just talked about distributions – the capacity for distributions to and from China. And if you're not really funding Clear Media, then how are you thinking about the possibility, if at all, of losing a majority interest in that entity, if they were to seek third-party funding? Are they thinking about liquidity issues and the need for third-party funding? Are they thinking about months left of cash and how to meet those significant fixed-cost obligations? Anything you can speak to that effect would be helpful. And then on the tax status and the potential savings there, how – let me back into this, how much interest were you not able to deduct before making this election? And what exactly would that save you if you already weren't paying cash taxes in the U.S.? Does it just increase your ability to accumulate NOLs from here? Is that it? That's all for me. Thank you.

Yes. I’ll take – two very different questions. I'll take the first one. And again, I'd like to reiterate, Clear Media is a separately publicly traded company on the Hong Kong Stock Exchange. They have a full management team, and I'm sure they're all over their liquidity risks. China has been a challenging environment. Their Board and management team is actively monitoring the situation. I previously mentioned, they have levers in their business, much like we have in ours with respect to CapEx and OpEx remediation. And I don't know that I can speak much more than that. Obviously, we're watching it, but that's their company. And I'm sure they are watching it very closely. The second question about taxes. I think the way I'll respond to that is the new tax law limited interest deductibility and for a highly levered company like ourselves, there was a significant amount of interest expense that we could not shelter our income with. What this election will do is enable us to lift the interest deduction cap on the amount of interest expense that we have that is ratably associated with the percentage of business we have is real property.So, our U.S. billboard plant, a significant percentage of our business, the interest expense related to that and this is a non-tax person description, but this is what you get, is no longer capped. And as a result, whatever you modeled for cash taxes in the U.S. is zero. And so I think that this is a positive election for the company from a free cash flow perspective. And I think most people who had done their calculations and attributed cash taxes in the U.S. can take those out this year and then take all but a small amount out for next year. And that is a significant election, it will contribute to free cash flow, and it is something that we will benefit from for the next couple of years.Now obviously, it's a complicated formula. The amount of real property you have affects the formula. The amount of cash interest expense you have effects the formula. But for the next couple of years, we will be a beneficiary of this election.

That’s helpful. Thank you.

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

Thanks. A couple more things on the guidance. You're indicating basically margin improvement in the United States but – margins flat and a lower growth level internationally. Wondering within the international markets, are there certain markets within the International space that are driving the concern about lower margins? And then related to the FX challenge. Typically, the revenues and expenses have had sort of offsetting factors. So it hasn't really come, it sort of come out in the wash. But are there any comments you can make as to if the exchange rates stayed at current levels, what those impacts might be in your overall International business?

Yes. I'll tell you what, I'll take a stab at the international margins, William may add some color, and then I'll come back to the FX question. On the International margins, I wouldn't assume, just because of the way we provide guidance that – because the revenue and the adjusted EBITDA are in the same low to mid-single-digit ranges that there isn't margin or that there is margin depression there. You can be at one end of the spectrum and the other and still be in the same range. I expect that we'll continue to see margin improvement internationally. It just so happened on the Americas side, there was a break, and we could say revenues came in at one place and you saw a margin improvement. But the way that we provide guidance, I don't think you can just default to, one has margin improvement and one doesn't. I think we will see positive margins in both business and continue to work – to improve those margins. And William, I didn't know if you had a – any info on like what countries maybe are driving that. Obviously, the Paris contract is driving that.

Yes. I would just add, Jim, that we – as you know, and we talked many times in the past, we run the International business, it's the portfolio of businesses operating in a number of markets and a number of continents. So, the overall figure hikes, some pretty significant variations in performance. And we saw some very strong performances and margin improvements in some significant market towards the end of 2019 and into this year. So I called out, particularly the U.K., where we had an exceptional year in 2019 and a very strong finish – strong performance in Spain, strong performance in Finland and Switzerland and others as well. So it is a varied picture across the portfolio.

And then Jim, on the FX question, I think it's probably worthwhile to kind of explain how we think about it. And that really isn't the translation risk on where Forex is moving on our balance sheet. It really is, to the extent that we have free cash flow in a foreign currency that we anticipate utilizing somewhere else in a different currency. And that's the real exposure that we look at. And to the extent we would hedge – we would hedge that exposure. But your question, I think, is where we operate, do we see FX headwinds. Look, if I could predict where FX rates were going, I'd probably be in a different job, making more money. I think that euro exposure is a significant amount of the exposure we have. So, your view on euros could help guide you to what kind of headwinds we see. But again, our focus is on making sure we don't have exposure to cash flow, not balance sheet risk.

Okay. Maybe, one separate question. Is there an optimal balance between print and digital displays? You're increasing your digital exposure, but at some stage maybe print is still going to be more appropriate to certain applications. Or do you think that's not true and that everything eventually goes to digital displays?

Hey, Jim. It’s Scott here. I’ll take a crack at that and give the other guys a chance to chip in. We think print is a very important part of our business. And we think that there is absolutely a balance. The earlier question where I was referring to some of our markets have gone to more than 50% digital revenue, we still have very meaningful print positions, and there are definitely advertisers that prefer that format. They like to “own a location.” So I think that you're going to see us working to optimize across those two and that, that will be sort of a perpetual feature of the business over the next bunch of years. I don't see print being something that we would be looking to take a step back, because customers do value it.

Yes. I'd absolutely echo that. I mean across our global footprint, print is absolutely at the heart of our business. It represents in the sense the core values of out-of-home is being a mass-reach medium digital ad value in some cases. But we certainly don't see us becoming a 100% digital business.

Okay. Thank you.

Your next question comes from the line of Stephan Bisson of Wolfe Research.

Good morning. First, behind the strong Americas guide, are you guys seeing really any kind of dichotomy in performance of markets or larger markets doing better than smaller markets as local ahead of national? And are there any categories that are particularly strong?

So, from a guidance perspective, we are looking at our channels, we're looking at our product lines, and we're looking at our geography trends. I think what we have been seeing over the last 18 months has been strength across the channels. So airports, national and local are all seeing good strength. We've seen strength across both printed and digital. And as we've looked at guidance, we have to take into account supply-demand balance and things along those lines as we're looking downstream. But there's not a particular category or a particular product line that's coming into play. Certainly, our anticipated digital conversion is something that we take into account. And we're expecting our level of conversion in the States to be the same or maybe a little bit higher than it was in 2019. But there's not any one particular thing that's driving the business. The key to having the business perform well – and you saw it in our 2019 results, we talked a lot about our digital conversions and the things we were doing with data, but we also talked about what we did with premier panels and converting that. And so innovation and – across the whole product line is important to keep the customers engaged. And what we're looking at is we guide – is the combination of what we're able to see in terms of deals that we've already done, what we know we're going to do in terms of product innovation and capacity, and what we believe in terms of how the market is going to develop over the course of the year. Hopefully, that sheds some light for you.

It does. And then would it be fair to assume that most of the revenue growth is driven by pricing rather than occupancy?

I wouldn't say that, that's fair to assume. We do focus on yield, particularly if the business becomes more digital, and we were 34% digital in Q4. The concept of yield is a more driving concept than focusing just on price or just on occupancy because you can do different things with the product. So, as I look back at 2019 and really, the last couple of years, it's been a balanced growth driver that we've had because we've seen both occupancy and our achieved rates go up. And frankly, we don't really focus on that. We focus on the yield aspect.

Got it. Thank you so much.

[Operator Instructions] Your next question comes from the line of Alexia Quadrani of JPMorgan.

Hi, this is Anna Lizzul on for Alexia. Thank you so much for the question. Just building upon the previous question, did you see any strengths or weaknesses in any particular verticals such as technology, retail, financial services or any others?

So, are you asking from 2019 or you’re asking as we sort of look at 2020 ahead?

For 2019 particularly in the Americas business.

Okay. In 2019, our biggest category growth was in insurance. That was a very strong category. Technology was a very strong category. Business services performed well. Food and food products performed well. Entertainment was a good category for us. So those are the ones that we're leading. And I'm sure your related question would be, what were the ones that we're lagging. And the ones that were most challenged in 2019 were travel and transportation, telecom and beverages. Beyond that, it starts to get pretty small. It was a pretty strong year across all the categories and our growers greatly exceeded our shrinkers, which was obviously key in delivering the results.

Great, thank you for that. And just as a follow-up, what impact have you seen so far from the coronavirus across your business segments? And does your guidance incorporate any potential hit to the results? And what gives you confidence in the full year outlook?

So, I think on coronavirus, the truth is, this is rapidly evolving situation, and we're obviously monitoring it very closely. We're particularly concerned about any of our people who might be infected, both in China and elsewhere. It is moving very quickly, I would say. And we have so far – as we announced this morning from China, we've certainly seen an impact on the China business in the first quarter. We have seen some limited instances of it having an impact in a small number of the European markets to date. But it's really, I think, way too early to try to evaluate what the impact would be across the full year.

Okay. Thanks.

At this time, there are no further questions. I will now turn the call to management for any closing comments.

Thank you. I want to ask the question that wasn't asked, and that is how do you intend to attack your leverage profile. And I want to talk about that a minute. First and foremost, fundamentals, we want to grow the business, we want to manage cost effectively. And by that, I mean, we're going to continue to invest in the high-margin operations, particularly in the U.S. We have opportunities for opportunistic refinancings. The term loan B market is attractive. But primarily, I'm referring to the opportunity in February of next year to refinance our expenses 9.25% notes. If the market environment that we have today holds until then, that's a significant amount of savings that we can achieve and grow free cash flow. You've seen effective tax planning strategies, we're implementing that. That also increases free cash flow. And as William mentioned, and as I kind of weighed in on as well, the potential for accretive dispositions, it is something that we are considering as long as we get fair value for whatever it is that we're looking at. So in closing, I wanted to kind of point that out, and William, I'll turn it over for you if you have any remarks.

Thank you, Brian, for underlining those really important points that I think we have made it very clear the direction we're moving in. I think we've given very clear sense of the huge momentum that we have in the business, particularly in United States, and really appreciate everybody joining the call and your interest in the company, and we look forward to updating you through the year. Thank you very much, and good morning.

Thank you. That does conclude the 2019 fourth quarter and full year earnings conference call for Clear Channel Outdoor Holdings, Inc. You may now disconnect your lines, and have a wonderful day.