Ladies and gentlemen, thank you for standing by and welcome to the 2020 First Quarter Earnings Conference Call for Clear Channel Outdoor Holdings Inc. [Operator Instructions] I would now like to hand the conference over to your host, Eileen McLaughlin, Vice President, Investor Relations. Thank you. Please go ahead.

Good morning and thank you for joining Clear Channel Outdoor Holdings Inc 2020 first quarter 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 first quarter 2020 operating performance of Clear Channel Outdoor Holdings Inc. After introduction and a review of our results, we will open up the line for questions and Scott Wells, Chief Executive Officer of Clear Channel Outdoor Americas will participate in the Q&A portion of the call.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 the 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 will provide certain performance measures that do not conform to generally accepted accounting principles. We provided 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 are 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 non-cash compensation expense items, as well as segment revenues and adjusted EBITDA 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, May 6, 2020 and may no longer be accurate at the time of replay.With that, please turn to Page 3 in the presentation and I will now turn the call over to William Eccleshare.

Thank you, Eileen and good morning everyone and thank you for taking the time to join today’s call. I would like to start by saying that I hope you and your families are well and safe and that you are managing to adapt to the extraordinary world in which we now find ourselves.As I assume many of you are doing, Brian, Scott and I are conducting this call remotely today, so please bear with us in case there are any technical issues during the call. It’s been just over a year since we began executing our vision as an independent company and I can truly say that it has been an incredibly transformative journey for Clear Channel Outdoor. The strength of our global platform, combined with our focus on the four key pillars of our strategy: growing the out-of-home medium, technology leadership, customer focus, opportunistic expansion has continued to deliver the flexibility and creativity that our customers want. Our investment in technology leadership both in our digital network and our radar platform continue to drive growth particularly in our U.S. business. However, as we all know the spread of COVID-19 in the last few months has affected the general economic climate with an impact upon businesses in every sector including ours. The impact in Q1 was largely on our European businesses and, of course, in China.Due to the continued global spread of the virus including throughout the United States, we anticipate significant impact on our results throughout our business during the second quarter and for the rest of the year as more customers deferred buying decisions and reduced marketing spend. We should acknowledge though that as the situation continues to evolve the full magnitude and duration of the downturn and its impact on our results is difficult to predict. We…

Thank you, William. Good morning, everyone and thank you for joining our call this morning. As William mentioned, we have seen a significant impact to our business as a result of the shelter-in-place orders in our markets. However, we believe the initiatives we are taking will strengthen our financial position and support the continuity of our platform and operations as we work through the economic downturn. Before discussing the details of the steps we are taking to increase liquidity and preserve financial flexibility, I do want to review our first quarter results. As William mentioned, the Americas team delivered a tremendous quarter demonstrating the effectiveness of our strategy prior to COVID-19 and what we believe will help us manage our business now and best position Clear Channel once we are beyond this crisis.Moving on to the results on Slide #4, as in the past, during our GAAP results discussion I’ll also talk about our results adjusting for foreign exchange, which is a non-GAAP financial measure. We believe this improves the comparability of our results to the prior year. As I mentioned last quarter beginning 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. Additionally, we have changed our segment information to reflect changes in the way business is managed and how resources are allocated by the company’s Chief Operating Decision Maker.Effective January 1, 2020, there are two reportable business segments: Americas, which hasn’t changed and Europe which consists of operations in both Europe and Singapore. Our remaining operating segments are China and Latin America, which do not need the quantitative thresholds to qualify as reportable segments and are disclosed as other. Of course China will no longer be included in our results…

Thank you, Brian. As you can see, our team has been actively responding to this crisis from an operational, financial and strategic perspective. Looking ahead, I am confident that we’re taking the right steps to protect our global team, preserve our financial flexibility and ensure that we are in the best possible position for success when we emerged from the COVID-19 crisis. We are moving forward with an aggressive targeted approach to executing our short-term strategic priorities. And I am confident that the resilience of our business and the agility of our teams that represent the company’s unique and fundamental strength. We have firm plans in place to capitalize on the gradual rebound and are actively working with brands to ramp up advertising for post COVID campaign. Throughout all of this we continue to prioritize the health and safety of our employees. I look forward to providing updates regarding our progress.Now Scott will join Brian and myself in taking your questions. Operator?

[Operator Instructions] The first question will come from the line of Kannan Venkateshwar with Barclays.

Hey, guys. This is Dave on behalf of Kannan. I just have a couple of questions, the first one is, it seems that you’re filing today mentioned some material adverse change language around some liquidity issues. And I just wanted to understand, if you can elaborate around how are you thinking about meeting your obligations going forward? And the second follow-up is around the Q2 impact around top line, how should we think about this? And going forward even if the shelter-in-place restrictions, is down there will be some social distancing for the foreseeable future. So how should we think about this recovery period for the rest of 2020 looking like? Thanks.

I’ll tell you what I will be trying to do...

You want to go first and then I’ll pickup on revenue.

Perfect. That’s exactly what I was going to say, William. Thank you. So when I think about the language you’re referring to, I’d kind of like to first focus on we do make a statement about how we feel about liquidity for the next 12 months and we are comfortable that we have sufficient liquidity. I think the cautionary language you see, while new in this filing won’t be uncommon for companies that are impacted by COVID-19, and so it is additional language, it’s cautionary language, I don’t think it will be uncommon. But I don’t want to – I don’t want it to replace the importance of the statement that we’ve made in our filings and also on this call, that we think we’ve done the things we need to do to meet our obligations for the next 12 months and we will continue to try to improve upon that. We understand the value of liquidity and we’ll do everything we can to make sure that we have it. So I wouldn’t focus on additional language, there’s nothing meant in terms of signaling by the inclusion of it’s cautionary language, and I would take it in balance with the other statements we’ve made. William, I’ll let you talk a little bit about the second part of the question.

Yes, thanks. And thanks Dave for the question. I mean, I think as we look into Q2 and as we start to see some of the lockdowns being lifted, there clearly is a sense that our audiences are returning to the street. And therefore, our signs and our boards are getting visibility from our customers. But I think what is impossible to say at the moment is whether our audiences while they are returning, whether they are going to be there in the same strength as they were immediately before locked down. And I think we see very different situations in different parts of the world and frankly in different parts of the U.S. So I think Brian, who lived in Texas will probably say things are returning to normal pretty quickly. I think if you lived in New York City you wouldn’t be saying that. Similarly, Zurich is returning to a kind of normality, London definitely isn’t. So there’s a very varied picture across the world. And while our audiences, our billboards and our science are certainly returning, I think is going to take some time before you would say it had returned to normal, that’s one side of it. The other side of it is whether advertisers are going to be returning to advertising spend as quickly as perhaps we would wish, because there is no doubt the damage to the global economy caused by the lockdown has been pretty significant. And again, of course, it varies market by market. But I think what I said earlier in the prepared remarks, I would just repeat, that we are monitoring this on a daily basis, we are keeping a very, very close eye on our pipeline and we are adjusting our cost base accordingly.

Got it. Thank you.

Thanks.

Our next question will come from the line of Avi Steiner with JPMorgan.

Thank you. Good morning. I’ve got a couple here. And I apologize, I’ve been in here, because the super busy earnings this morning, and I hope you’re all staying healthy and well. With that can you remind us of the transit versus non-split in your two major reporting segments now? And do you think trends and particularly airports will perform materially worse than the traditional billboard business? Thanks, and I’ve got a few more.

Thanks, Avi and thanks for the questions. Brian, do you have – do we have the split of transit and non-transit by division. Do we provide any color on that?

There is some disclosure in the 10-K, we don’t update it in the 10-Q so you can look and see in terms of the overall business, what the split is. I think what might be helpful is if Scott talks a little bit about airports and which is the most significant, kind of, non-billboard activity in the U.S. and you can speak a little bit to the transit as a proportion of the business in general terms. But for specifics Avi, I’d refer you back to the 10-K.

Yes. It’s Scott here. Thanks Brian. Airports is less than 20% of the U.S. we have disclosed that in prior roadshow documents and things like that. As far as its performance it has actually held up pretty, pretty resiliently, I mean, you’re comparing it to a very difficult situation across all, but I would not think of airports as catastrophic relative to the challenges that we are facing in other inventory. I think the thing you’re going to see in that business is that it will be probably the last part of our business that snaps back aggressively, because of the hit on audiences, but because that is very premium inventory with a premium audience that is still moving through the airports, albeit with smaller levels than historically. It has held up reasonably well.

Thank you. That’s great. And then on the $100 million of cost cuts and again if you mentioned some of this detail, I apologize. But can you flush out the sources of where that’s coming from? And maybe relatedly, discuss progress with leaseholders, landlords etc, on for merits. Thank you.

Well, I can speak to the main categories. And then I’ll turn it over to Scott and William for the color. The site lease expenses, is our largest cost category over 50% of our operating expense, the majority of which is fixed. And so in order to be impactful, you have to focus on your leases, the company has done that and we started very early in Europe, because we were hit there first. And so I’ll let William and Scott talk about progress. The next largest operating expenses is human capital compensation expense and we’ve talked a little bit about that. So both those are significant portions of $100 million. In addition to that we should also talk about discretionary expenses. And in this time period, we can be very focused on certain categories, and we are. So those are the three main buckets. They would comprise most of $100 million and I think with respect to site lease, the most important one, we can provide a little extra color. I think we provide a lot of color on CapEx, so not on the expense side, but to the extent that is discretionary CapEx or something that can be deferred very focused on it. There are certain investments we will continue to make, because they do make sense. But as you can see from the dramatic decline in capital expenditures we’re taking it very serious. William and Scott, did you have additional comments you want to make maybe on the site lease and the compensation expense?

Sure. Scott, you want to go first for Americas and then I’ll make some European comment as well.

Yes, absolutely. Thanks, William. So we have thousands of landlords and the process of engaging is one that you need to do kind of landlord by landlord, we can send both letters out to initiate the process, but these are all bespoke individual negotiations. I would tell you that we are seeing good partnership with our municipal lease portfolio, pretty much across the board, because this is a government inflicted challenge to a degree, obviously not the virus, but the shutdowns. The governments are taking accountability for having done that and are working with us. The private landlord process, they obviously are not accountable in the same way, and are facing this challenge across their portfolios and we are working with them. We are seeing success, but it is slower. And because of the distributed nature of it, that’s one of the reasons why we did salary reductions and furloughs and things along those lines that we’re able to see savings immediately on because the site leases are much bigger part of our expenses. But there is a lead time to getting it, but we’re seeing success really across the board, and I think we’re going to be taking substantial cost out in that area. William?

Yes, let me just add a couple of things, Avi, on this. I mean, I think on the site lease point, and much of what Scott has said, absolutely applies in the rest of our world as well. And the truth is that, I think our landlords would be surprised if we were not negotiating at this stage or renegotiating at this stage. And that is absolutely the expectation and the conversations that we’re having. As Scott said across thousands of landlords across our world, those conversations are being productive and collaborative as we work across this process. The other thing I wanted to say was the, the speed with which leaders across our businesses pivoted to this process of renegotiation was truly remarkable and impressive, and I think that the impact that we’ve been able to deliver in the second quarter of the target that we talked about of $100 million savings in the quarter on opex. I think that’s a very impressive response to this crisis.

Appreciate those comments. Thank you. I will let it here. Appreciate the time. Brian, you touched on the menu of digital liquidity options, I think you said secured maybe unsecured. I want to make sure I heard that correctly? And then with LATAM and I guess, other segment now and I’ve been around when it’s been everywhere at this company. Should we think about that as potentially up for sale and another liquidity lever? And with that, I will turn it over. Thank you all for the time.

Yes. Well, I mean, the move to Latin America to the other segment was driven really by how our Chief Operating Decision Maker, Williams manages the business and in consultation with our auditors. I think we’ve kind of realigned everything. So it’s not specifically tied to any view on our feelings toward asset monetization. That being said, I know, William have spoken on prior calls about focusing on the higher margin businesses, and I don’t think it’s any secret. Our U.S. portfolio of businesses, are the higher margin businesses, our core billboard businesses, our core billboard businesses, our digital billboards very high margin and we have expressed an openness with respect to kind of a non-higher margin businesses. We’ve entered into an agreement to sell our interest in China a lot of people have taken that comment really to mean European assets. But I would put Latin America in that bucket, as well. Again, there’s not a for sale sign up for Latin America that we operate in four countries, they are successful businesses. But I would not call them core to our operations and I would not put them in the higher margin, kind of, category. So while I wouldn’t say this movement into other is an indication that we have changed our view with respect to those assets. I do think that we’ve made other statements that do indicate how we’re thinking about the high margin versus the non-high margin businesses, if that is helpful to you.

Well, we are doing, as always, thank you all. Stay healthy. I appreciate the time.

Thanks, Avi.

Thanks, Avi.

Thanks a lot.

The next question will come from the line of Steven Cahall with Wells Fargo.

Thank you. And sorry if I missed some of these answers. But maybe just first on M&A, you got a deal done in China. And I think we were all kind of surprised and impressed by the ability to do that in these volatile times. And maybe in retrospect, it seems like China was starting to trend toward reopening and that probably provided your buyer with some of the clarity that they needed. So if we start to think about Europe, along those lines, can you give us a sense of maybe where you think you are in the reopening process in some of your major markets? And maybe help us just think about what the M&A environment might look like in those markets and weather potential buyers feel like they have any line of sight yet, maybe as it compares to the pace of where things have gone in China. And I have a follow-up. Thanks.

Okay, thank you and thanks for the question and thanks for the comments on the China sale, which I think was a positive outcome for everybody. In terms of the reopening of Europe, I would say it is truly literally very early days. I mean, as I mentioned, there’s been some opening up in Switzerland, there’s been some relaxing of the rules in Italy, some relaxing in Spain, in the UK we’re expecting an announcement from our Prime Minister on Sunday; and France has announced a kind of program of stages of relaxation of the rules. But there is no sense that a switch is being flipped and markets are suddenly returning to normal at the moment. So I think it would be really too early to say that there are any signs of recovery yet within the European market. I don’t understand downbeat about it. I’m very optimistic about the strength of our medium and the momentum that we have in the business. And I do believe that once audiences start returning to the streets, we will be in a very good position, particularly with the increased volume of digital inventory that we have. I think we’ll be in a very good position to bring revenues back. But in terms of M&A, I would absolutely stand by the statement that we made in February that we will actively evaluate all opportunities to enable us to support the growth in the higher-margin businesses, particularly in the U.S. But there is no indication at the moment that the markets in Europe are returning to normal and clearly that makes M&A more challenging.

Great. And then just a follow-up on the cost initiatives that you outlined, maybe what sort of pace can we expect that $100 million of run rate to start to kick in, like could we see that being realized by the end of the second quarter? Does it take a little longer to roll all of that through, and when I’m kind of getting out with all of this where I think a lot of investors are wondering if you have a lot of cash on the balance sheet after what you’ll get from Clear Channel, Clear Media Limited and you’ve taken these cost initiatives that should give you some runway to go through a tough environment and burn a little cash in the short-term. When you kind of do your conservative modeling, I guess, just how worried are you about that runway? Or do you really feel like you have ample liquidity unless this downturn is very, very prolonged. Thanks.

So a couple of pieces to that question and it’s a good question, it’s actually kind of The Question. So from a liquidity standpoint, I do think we feel like we’re in a reasonable position as I think, I’ve answered on an earlier question we actually make the statement that we are comfortable with our liquidity position for the next 12 months. That being said, there is just such a lack of visibility and the operating profile of the company and this could be more prolonged than we expected you could get the virus behind you. But then are you – how badly were your customers impacted and how quickly do they come back. So I don’t think you can have too much liquidity in this environment. That’s why we did implement and focus very intently on the cost savings initiatives, that $100 million number is what we expect to attain in Q2, and I think as we move forward and get more visibility into both the severity and the length of, kind of, the impact of the pandemic, we’ll have to continue to adjust that cost base to match the operating performance. So I think we’ve done what we feel like we need to do today, but the book isn’t close. We need to continue to remain focused, make sure that we aligned our cost base with the business and continue to look for additional opportunities. Again, I think we feel good about the liquidity today, but the book is not closed. We’re going to continue to look at opportunities to increase liquidity, and make sure that the expense base of the business is rightsized for the operations. Scott, William, I don’t know if you have anything else to add, but that’s how I would respond.

I think it’s a very good answer.

And maybe just the last one then on that Brian, I assume then there are additional levers you could pull on CapEx, if you reassess the environment at a later time?

I think there is additional levers in OpEx and CapEx, should the environment continue to persist, instead of furloughing employees, you may a more permanent decision in certain cases. Instead of differing lease benefits you may have to completely realign the cost or defer them further out on the CapEx side, you may just stop doing anything other than what you actually have to do for the safety of your employees. So I think we’ve taken the cost, we feel are appropriate at this point in time. But yes, we can always, if we need to adjust we could. We also want to remain flexible, so that if things do start to come back, we haven’t made cost they impair our ability to recover. So a lot of it really is decided by our visibility and every day that goes by, every week that goes by, we learn more and we want to remain flexible to adjust to what we’re seeing.

Great, thank you.

Thanks, Steve.

Our next question will come from the line of Lance Vitanza with Cowen.

Hi guys. Thanks for taking my questions. Most of them have actually been answered. But perhaps just back on the efforts to negotiate with your landlords and you mentioned that you’ve got thousands of them. The $100 million of cost savings for the second quarter to what extent does that depend on additional lease negotiations that you haven’t yet gotten done or is that $100 million, sort of represent changes that as we sit here today in early May have already been put into place? And then I have a follow-up.

So let me go first on that. I mean, I would say we are very confident of achieving the target that we set out today, if we weren’t confident in setting that $100 million target in terms of the savings for the quarter. We wouldn’t have put it out there. We are still in very active negotiations with those thousands of landlord that we talked about, but we believe that, that savings is achievable.

Okay, thanks. And then just, sort of, a follow-up on that, where you have already been successful, how do you define success, I mean are these reduction sort of proportionate with the revenue reductions are they true discounts or are you deferring the lease expense into subsequent periods, any we color on that would also be helpful? Thank you.

Yes. I mean, I think there is a range of answers to that question and none of them are entirely precise. We are negotiating hard on the fixed side – the fixed lease cost expenses, we are seeking to convert those minimal – minimum annual guarantees that we talked about earlier, converting those from fixed to variables, they reflect the changed revenue environment that we are operating. And of course, there are very significant differences in terms of the kinds of negotiations that we have with our municipalities versus with private landlords. So I think success comes in different ways and each one – each contract brings a different set of challenges and opportunities as we go into those renegotiations. So there isn’t kind of one-size answers to that question, I don’t think. Scott, do you want to add anything from there? Do you [indiscernible] perspective on that?

I’d agree with you, William. I think it is absolutely a mixture of all those, and where there is a contract that has a substantial fixed portion and then a variable portion, we are trying to turn it to variable, but that is not the majority of the U.S. revenue at least, I’m not sure how that would stack up around the world. But we do that when we can, where we variabilize where we can, but that’s a minority of our arrangements.

Yes. Thanks, guys.

Thank you, Lance.

Thank you.

Our next question will come from the line of Stephan Bisson with Wolfe Research.

Good morning. Thanks for all the color, guys. I know, it’s really hard to kind of look into the current environment and kind of see things as they develop. New York Times today said that they’re expecting revenue declines on the advertising side of 50%, I think broadcast TV is anywhere between 30% and 40% from this morning’s releases. Can you give us any quantification at all as to where – in that range you might expect to end up for the second quarter?

I honestly feel that every day I read a different forecast from a different journalist or from a different consultancy firm, and every day they’re different. And the honest truth is nobody knows, they really don’t, I don’t see how they can know, given that we don’t even yet know what the timing of the end of the lockdowns in different states or different countries are going to be. And we don’t yet have any real sense of what the damage to the economies are going to be. And we don’t yet know how advertisers is going to respond to this, there will be some advertisers, who will learn from previous downturns that it’s the way this thing is to continue to support their brands and continue to advertise. There will be others who retrench and cut those budget. But the truth is nobody knows at the moment. That’s why we are – as I said, being vigilant and keeping a daily eye on our pipeline, as I said to an earlier question, in some cases there are signs of a positive pipeline building as things return to normal, but it’s way too early to call a number for Q2, I’m afraid.

Understood. Thanks so much.

I wish that could be more helpful.

It’s unprecedented environment. Thanks so much for all the color, you guys gave.

That’s the word. Thanks, Stephan.

The next question will come from the line of Jim Goss with Barrington Research.

Thanks. I’ve got a couple also. You have given a lot of color, especially in terms of the European markets and which ones are coming back sooner rather than later. Have you – is there anything you can say about the key domestic markets in terms of the importance to you relative to how that mix in this uneven opening might match up with your business?

Scott, do you want to take that.

Yes. Thanks, William, I’ll take that – I’ll take a run at that. We are a large DMA business, we are experiencing this William said this in the upfront comments as a pretty diverse experience, it’s challenged across the country, but we have a very strong business in Florida, a very strong business in Texas, very strong business in the Southwest. All of those regions have been impacted less than the Coasts and the Midwest is sort of in between. And so as we look to things building back the two variables William described earlier are exactly the critical ones. Variable one is the build back of audience, which in those markets, the car culture in the United States is such that it’s not like our audiences went to zero during this – not even close. And that’s something that we’ve actually been able to keep a pretty good eye on with our RADAR tool and we’ve been able to engage customers on how that has played out and how it’s starting to build back and we’ve had a couple of weeks of audiences building back across the country, but particularly in those stronger areas that I’ve talked about. The second part of it, as William said is how much fundamental damage has been done to our customer base, and I don’t think we’re going to know the answer to that for some time now, as we work through this. But we are a very local intensive advertising medium and we’re working very closely to support our advertising partners. But it’s really hard to know how the snapback is going to happen, but the downturn was not uniform across the country, that’s for sure. Does that answer your question?

Yes, that gets to some of that. And maybe a couple of other things, M&A, you’ve talked about potential sales or maybe even some tuck-ins. I would imagine there’re some challenge smaller players, who might be receptive to potential sale. Is that something you’re pretty actively exploring right now to round out certain markets?

Well, I think right now, our focus is on liquidity and then in the current environment it may be challenging to make that type of investment. That being said, if the right opportunity came along, I think we certainly want to take a look at it. But again, it’s got to fit within what we’re seeing and experiencing and right now we’re just challenged with a lack of visibility. So I would never say, never, but I think right now we are focused on building liquidity and so I think like many others, we would have to look very hard at and what kind of benefit any type of tuck-in or M&A opportunity really brings to the table.

Okay. And one final one, sort of, a blue sky one, we have seen broadcasts where, there are Zoom meetings, Zoom broadcast from homes and that sort of thing. Are there any other use cases for home displays that you’ve started to think about within the crisis?

Well, I think, what we have learned in the last few weeks is that the value of our inventory it has been very significant in terms of being able to deliver messages around safety, around the spread of the virus in different markets and ensuring that we keep up our public informed. So I think we have learned to be very flexible and we’ve learned the value of our inventory in terms of getting messages across. I don’t think there is anything more that I can say though in terms of how we see the future at the moment.

Okay. Well, thank you very much.

Thank you and thank you everybody for joining this call – this morning. We appreciate your interest and your support during this extraordinary period in our global history. So thanks to everybody for joining and stay safe. Thanks.

This does conclude today’s conference call. We thank you for your participation and ask you to please disconnect your lines.