Clear Channel Outdoor Holdings, Inc. (CCO) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the 2020 Fourth Quarter and Full Year Earnings Conference Call for Clear Channel Outdoor Holdings, Inc. 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 2020 fourth quarter and full year earnings call. On the call today are William Eccleshare, Chief Executive Officer of Clear Channel Outdoor Holdings, Inc.; and Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings, Inc., who will provide an overview of the fourth quarter and full year 2020 operating performance of Clear Channel Outdoor Holdings, Inc. and Clear Channel International BV. After an introduction and a review of our results, we'll 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.

Good morning, everyone and thank you for taking the time to join today's call. As with the past several quarterly calls, we are conducting this call remotely and respectfully ask that you bear with us in case there are any technical issues during the call. Like all of you, we enthusiastically welcome the New Year with an eagerness to begin moving past the many impacts COVID-19 has had on our personal lives, our industry and our company. Despite the unprecedented challenges brought on by the pandemic and the sporadic nature of the global recovery, we are heartened by the progress being made with regard to the development and distribution of vaccine, and we remain confident that our business will return to growth in 2021. It's worth noting that the out-of-home industry has consistently accounted for 5% to 6% of global advertising spend and was one of the only growing traditional mediums pre-COVID. Our industry has proven to be very resilient coming out of previous downturn, and we fully expect this will once again be the case as we emerge from the pandemic.

Thank you, William. Good morning, everyone, and thank you for joining our call this morning. As William mentioned, the past year was challenging, that we moved quickly to address our cost base, strengthen our liquidity and improve our financial flexibility. As we look to build a stronger company, we have also continued to make strategic investments in critical areas aimed at strengthening and expanding the effectiveness of our assets, while also refining our sales approach. Taken together, these initiatives and our improved cost structure place us in a solid position to benefit as the worldwide economy recovers. Moving onto the results on slide four. Before discussing our results, I want to remind everyone that during our GAAP results discussion, I'll also talk about our results adjusted for foreign exchange, which is a non-GAAP measure. We believe this provides greater comparability when evaluating our performance. Additionally, as you know, we tendered our shares in Clear Media in April of last year, and therefore, our Q4 results in 2020 do not include Clear Media. However, our results in Q4 and full year 2019 did include Clear Media's results. In the fourth quarter, consolidated revenue decreased 27.4% to $541 million. Adjusting for foreign exchange, revenue was down 29.3%. If you exclude China and adjust for currency, the decline in revenue was 24.5%. This finish was better than our internal expectations due to stronger than expected performance in the United States and certain markets in Europe. As William mentioned, this was sequentially better than the third quarter. Consolidated net loss in the fourth quarter was $33 million compared to net income of $32 million in the fourth quarter of 2019. Consolidated adjusted EBITDA was $101 million, down 51.1%. Excluding FX, consolidated adjusted EBITDA was down 52.1% compared to the fourth quarter of 2019. For the full year, consolidated revenue decreased 30.9% to $1.9 billion. Excluding foreign currency exchange impact, consolidated revenue for 2020 declined 31.4%. Consolidated net loss for the full year was $600 million compared to $362 million in 2019. And consolidated adjusted EBITDA for 2020 was $120 million, down 80.8% compared to 2019. Excluding FX, adjusted EBITDA was down 82% for the full year. These are certainly not the results we anticipated delivering when we started 2020. But we do believe the team did an exceptional job responding to the pandemic and taking the necessary steps to adapt to the dynamics in the marketplace. Normally, during the fourth quarter earnings call, I review both the fourth quarter and full year results for each of our business segments. But this year, for efficiency, I will focus only on the fourth quarter. Additional details of the full year results can be found in the 10-K, which was filed this morning. Now please turn to slide five for a review of Americas fourth quarter results. The Americas segment revenue was $258 million in the fourth quarter, down 25.3% compared to $345 million last year. As William noted, this marked further sequential improvement compared to the previous in the previous two quarters. Total digital revenue, which accounted for 32% of total revenue, was down 29.6%. Digital revenue from billboards and street furniture was down 15.4%. Digital revenue as compared to the prior year improved sequentially over the third quarter, which was down 34.8%, and print continues to perform a bit better than digital due to our permed inventory. National was down 27% and accounted for 37% of total revenue, with local down slightly less at 24%, accounting for 63% of revenue. Both national and local improved over the third quarter. Our top performing categories in the quarter included business services, our largest category, as well as beverages. Regionally, we are still seeing strength in our small markets and weakness in the largest cities. Direct operating and SG&A expenses were down 16.8%, due in part to lower site lease expenses related to lower revenue and renegotiated fixed site lease expense, as well as lower compensation costs from lower revenue and operating cost savings initiatives. Adjusted EBITDA was $94 million, down 34 -- 35.4% compared to the fourth quarter of last year with an adjusted EBITDA margin of 36.5%. Next, please turn to slide six and a review of our performance in Europe in the fourth quarter. Europe revenue of $268 million was down 17.9% and excluding foreign exchange, revenue was down 23% in the fourth quarter. This was a bit weaker than the performance in the third quarter as the stricter lockdowns in key European countries, including France, impacted our results. However, our results for the quarter finished ahead of our expectations, which speaks to the execution of our team, as well as the strength of our assets. The level of restrictions varied by country, with seven of our top 10 European markets posting sequential revenue improvements in the quarter, with the majority showing top line declines, less than half of what we saw at the outset of the pandemic in last year's second quarter. Digital accounted for 34% of total revenue and was down 18.8%, excluding the impact of foreign exchange. Adjusted direct operating SG&A expenses were down 17% compared to the fourth quarter of last year, excluding the impact of foreign exchange. The decline was driven primarily by lower direct operating expenses, in large part due to our success in renegotiating fixed lease expenses. Additionally, SG&A expense was down slightly due to lower compensation due to lower revenue, operating cost savings initiatives, and government support and wage subsidies. And adjusted EBITDA was $35 million, down 46.9% from $65 million in the year ago period, excluding the impact of foreign exchange. This was driven by lower revenues in the period. In August, as you know, we issued senior secured notes through our indirect wholly owned subsidiary, Clear Channel International BV, which we refer to as CCIBV. Net proceeds from the note offering provides incremental liquidity for our operations. Our European segment consists of the businesses operated by CCIBV and its consolidated subsidiaries. Accordingly, the revenue for our Europe segment is the revenue for CCIBV. Europe segment adjusted EBITDA does not include an allocation of CCIBV's corporate expenses that are deducted from CCIBV's operating income and adjusted EBITDA. As discussed above, Europe and CCIBV, revenue decreased $59 million during the fourth quarter of 2020 compared to the same period of 2019 to $268 million. After adjusting for a $16.5 million impact from movements in foreign exchange rates, Europe and CCIBV revenue decreased $75 million during the fourth quarter of 2020 compared to the same period of 2019. CCIBV operating income was $0.8 million in the fourth quarter of 2020 compared to operating income of $38 million in the same period of 2019. Now, let's move to slide seven and a quick review of other, which includes Latin America. As a reminder, the prior year results include Clear Media, which was divested in April of 2020. Latin American revenue was $15 million in the fourth quarter, down $11 million compared to the same period last year. Revenue was down due to widespread impact of COVID-19. Direct operating expense and SG&A from our Latin American business were $15 million, down $4 million compared to the fourth quarter in the prior year, due in part to lower revenue as well as cost savings initiatives. Latin America adjusted EBITDA was $1 million, down $6 million compared to the fourth quarter and the prior year due to the impact on revenue from COVID-19, partially offset by cost savings initiatives. Now, moving to slide eight and a review of capital expenditures. CapEx totaled $31 million in the fourth quarter, a decline of $62 million compared to the prior year period as we continue to focus on preserving liquidity, given the current operating conditions. CapEx was also lower due to the sale of Clear Media, which, as I mentioned, occurred in April of 2020, although fourth quarter CapEx did include a small amount related to the Port Authority contract. For the full year, CapEx was $124 million, down $108 million compared to the full year of 2019. Again, the reduced CapEx for the full year was primarily due to our liquidity preservation measures and the divestiture of Clear Media. Now on to slide nine. Clear Channel Outdoor's consolidated cash and cash equivalents totaled $785 million as of December 31, 2020. Our debt was $5.6 billion, an increase of just over $500 million during the year, as a result of our drawing on the cash flow revolver at the end of March and issuing the CCIBV notes in August. Cash paid for interest on debt was $22 million during the fourth quarter and $324 million during the full year ended December 31, 2020. This was in line with our expectation and up slightly compared to the prior year due to the timing of interest payments, which was partially offset by lower interest rates. Our weighted average cost of debt was reduced from 6.8% in 2019 to 6.1% in 2020. Moving on to slide 10. As mentioned, we continue to focus on managing our cost base and strengthening our liquidity and financial flexibility. In September, we announced restructuring plans throughout our organizations. In our Americas segments, we completed our restructuring plans in the fourth quarter and we expect annualized pretax cost savings of approximately $7 million to begin in 2021. However, our plans for Europe have been delayed due to the evolving nature of COVID-19 impacts and the complexity of executing the plans. We now expect to substantially complete the plan by the first half of 2022. In conjunction with and in addition to these plans, we expect an additional annualized pretax cost savings of approximately $5 million in our corporate operations. Additionally, as I mentioned in my remarks on both the Americas and Europe segments, we continue to work on negotiating fixed site lease savings and have achieved $28 million in rent abatements in the fourth quarter or a total of $78 million year-to-date. Also, we received European government support and wage subsidies in response to COVID-19 of $1 million in the fourth quarter and $16 million year-to-date. The duration and severity of COVID-19's impacts continue to evolve and remain unknown. As such, we will consider expanding, refining or implementing further changes to our existing restructuring plans and short-term cost savings initiatives as circumstances warrant. Moving onto our financial flexibility initiatives. Earlier this month, we successfully completed an offering of $1 billion of 7.75% senior notes due 2028. Proceeds from the offering will be used to redeem $940 million of our 9.25% senior notes due 2024, as well as to pay transaction fees and expenses, including associated call premium and accrued interest. The timing was right for this offering given the strength in the high yield credit market as well as our improving outlook. In addition, we've derisked our maturity profile by refinancing approximately half of our 9.25% notes, which were unsecured and represent our next nearest material maturity. Our weighted average maturity is now 5.6 years, up from 4.9 years, with a run rate cash interest savings of approximately $10 million per year due to the lower coupon rate. All-in-all, the offering speaks to the continued support financial markets have for Clear Channel Outdoor and reflect our improving outlook, strong global assets and leading market position. Turning to slide 11 and our outlook for the first quarter of 2021. As William mentioned, Americas first quarter 2021 segment revenue is expected to be down in the high 20% range as compared to the prior year. This is slightly weaker than the fourth quarter due in part to the tough comps with the first quarter of 2020, when revenue increased 8.5% over the prior year, as well as the continued impact of COVID-19. In our Europe segment, we expect revenue to be down in the mid-30% range in the first quarter. Historically, the first quarter of the year is the smallest quarter for revenue. The weakness is due to the resurgence of COVID-19 cases, new variants of the virus and related government restrictions, particularly in France and the U.K. Latin America bookings continue to be severely constrained. Additionally, we expect cash interest payments in 2021 of $362 million and $335 million in 2022. The increase in 2021 is primarily due to the interest payments on the CCIBV notes issued in 2020, as well as various timing differences. And now, let me turn the call back to William for his closing remarks.

Thank you, Brian. So, to reiterate, despite the near-term challenges we continue to face and the uncertainty regarding the pace of the worldwide recovery, we are encouraged by the resilience of our business and the fact that infection rates are in decline in the majority of our markets, which together with the vaccination programs gathering pace is leading to a real sense of optimism. Our national and local businesses in the U.S. continue to recover. And in Europe, we're confident that the restrictions are starting to lift and our pipeline is strengthening. As we exit the first quarter and the environment continues to improve, we remain committed to executing against our growth strategy and delivering year-on-year growth in 2021. We believe our focus on working closely with our customers to give them real-time audience insight they need, including our efforts to expand our technology initiatives, spanning our digital platform, data analytics capabilities and programmatic capability put us in an even stronger position to return to revenue growth and benefit from our operating leverage as the recovery takes hold in the second quarter and beyond. We are now a stronger and more efficient company in the way that we operate, both in terms of the unique value proposition we deliver and the manner in which we run our business. Our people have shown their creativity and commitment, and we are poised to maximize the opportunities ahead. I look forward to providing updates regarding our progress in the months ahead. And now, Scott will join Brian and myself in taking your questions. Operator?

Thank you. Our first question comes from the line of Steven Cahall of Wells Fargo.

Thanks. Maybe first, William, you talked a lot about digital sales and programmatic. We've seen digital pricing bounce back in a couple of other advertising mediums. I was wondering if you're seeing any of that yet. Digital revenue was down in the quarter, but any canaries in the coal mine yet on that side of the business?

Yeah. Thanks, Steve. I mean, it depends, as always where you look. In Europe, we've seen a very strong performance by digital and pricing certainly remaining strong. In the U.K., as I said earlier, Q4 we saw 70% of our revenues coming from digital. In the U.S., it's a slightly different picture because, as you know, it's a very different format for digital. And I'll just ask Scott to kind of touch on what we're seeing in digital in the U.S. to give you a comprehensive answer there.

Yeah. Thanks, William. I think, Steve, if you look in our notes, as we break out some of our numbers on digital, you'll see that digital performance improved 1,500 basis points Q4 over Q3. And I think, I can comfortably say we had our best programmatic quarter ever in Q4. So, we do see it recovering. I think, Q1, we have a really tough comp, and that will probably -- will probably be flattish to a little worse off than the performance that you see for Q4. But there's definitely recovery coming in that area and we're definitely seeing improved demand. But the drag, overall, on our digital does come from our airport segment, which has had a tougher run of it. And I'm sure we'll get into that as we talk about segments later on.

Yeah. And then, maybe just turning to margins. Incremental margins were really strong in the quarter. How do we think about the fixed site lease savings? Will those continue as revenue returns? Are those structural? Or are those variable?

Well, there's -- Steve, this is Brian. There's a little bit of both. I think to the extent that we've achieved abatements and concessions or altered the underlying contracts then those should be expected to continue. But there's a significant amount of -- what I'd call, deferred rent. And as revenues start to return, those deferred rent expense will start to be paid. And you can see that as you look at our recruiting expense line, rent expense has gone up -- the accrued expense has gone up associated with those deferred rents. I think, the best way to answer your question is as follows. The team continues to work very diligently on getting rent abatements. We continue to defer payments during these challenging times. We had a lot of success throughout the year in the quarter. Fourth quarter, we had $28 million of rent abatements and that brought the year-to-date total as of December 30 to $78 million. So, a lot of success on that front, both in the Europe and the Americas divisions. But there is also kind of the whole deferred rent side. That's important from a liquidity management standpoint. It's reflected in our working capital. But as revenues start to return, we do expect to make those rent abatements, and it will start to reverse kind of in the working capital plan.

Yeah. And then last one for me, Brian. What would make you comfortable enough to start paying down the revolver?

Yeah. It's a good question. It's almost emotional in that you'd rather have the cash than not. I think, the right answer on that one is, as we see the recovery start to emerge and its upward sloping trajectory is one where we don't think there'll be a set back. That's probably the right answer from a holistic perspective. I mean, from a liquidity management perspective, our ability to have the outstanding is conditioned upon a $150 million liquidity covenant. So, we're somewhat indifferent just from a liquidity position. But I think from an optical and just a good cash management perspective, we'll probably keep it on our balance sheet until we see the recovery that doesn't look like it's going to reverse.

Yeah. Thank you.

Your next question comes from the line of Ben Swinburne or Morgan Stanley.

Thanks. Good morning. When you guys look into Q1, I was wondering if you could give us, especially in the U.S., a little more color on sort of the trends you're seeing through the quarter. I would imagine the comp gets easier as you look into March. And I'm wondering if you can give us any more specifics around billboard, transit, national, local, et cetera? And then back to cash flow, can you just remind us on the term loan, or actually across the cap structure, to what extent you've got floating rate debt? I just -- you gave some helpful guidance on cash interest in 2022. I'm just trying to figure out how kind of locked and loaded that is? Thanks, guys.

Hey, Ben. It's Scott here. I'll take the first part and then hand it to Brian to take your second part. So, you guys remember in the U.S. last year, we didn't actually see a lot of softness from COVID in Q1. We had a very strong Q1. We were up 8.5%. And actually, airports had a very strong quarter -- that quarter. They had also had a very strong Q1 in 2019. And so, when you think about the dynamic of what's going on with our numbers, it was against a relatively COVID free comp for us in Q1 in the U.S. And so, I think, what you're going to see is you're going to see that we had a couple of big deals last year that didn't come back. Census was out in the marketplace. There are a couple of other commercial advertisers that were hitting the ground hard beginning of last year that have not come back this year. And that would be the primary reason in the traditional roadside business why we'd be a bit softer sequentially. The airports business, I don't think we've hit the trough yet in it. I think we're getting close in terms of where that's going to bottom out, but it is doing substantially less well than the rest of the business. I mean, I think one way to look at that -- if you look at our percentage of airports last year, we went from about 17% in 2019, which is something we've disclosed in terms of our revenue mix. Airports last year was about 13%, and it didn't really start degrading until kind of May, June. So, that degradation is something that costs them about 300 bps in our mix for 2020. And I do think we'll see that bottom out, but it has not bottomed out yet.

Got it. And just quickly follow-up, if I could. I think Williams started the call talking about 2021 being a year of growth. I guess that really kicks in as you get into Q2, Q3 and the comps start to get substantially easier. Is that the right way to think about it?

Yeah. I would definitely be comfortable saying we're going to see growth return in Q2.

Got it.

Yeah. Ben, I would just add from a European perspective as well to your Q1 point. I mean, in Europe, we did start to see some COVID impact in March of last year, but it's also right to note, as I did earlier that we have seen pretty significant restraint on movement in -- from -- right at the start of January this year with the second or third wave of infections hitting in the U.K., France, particularly. So, it's probably been a tougher quarter than we expected. But I would say the -- there are very positive indications this week and beyond as we start to see a clear route out of those lockdowns announced by government across Europe and pipeline is starting to grow into Q2. So, again, obviously, significantly softer comps in Q2, but also a real sign of the market coming back for us in the second quarter both in the U.S. and Europe.

Got it. And then, Ben, on the kind of the floating rate exposure question. Our balance sheet is actually pretty straightforward. We don't have any material interest rate derivatives. So, you can take the -- a little over $2 billion of bank facilities as floating. It would put you a little over a third of our total debt floating interest rate. I would point out though that somewhat by design as we kick out our maturities on our bonds, our pre-payable debt becomes an important feature for us. And so, we have maintained a certain amount of pre-payable floating rate interest debt and that's about a little over a third of the total balance.

Gotcha. Thank you.

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

Hi, guys. Thanks very much for taking the questions. Maybe just to start as a quick follow-up to the last question about returning to growth in the second quarter. It sounded like, Scott, you were pretty confident in the U.S. that would be the case. And then William, I heard your comments, but was that obviously sort of your expectation that you think in Europe you will also return to growth in the second quarter? And I presume you were talking about year-over-year growth with the discussion about the easier comps, but how about on a sequential basis? Do we -- would we expect that -- I would assume we would expect that in both Europe and the U.S., as well as we think about the second quarter?

Thanks, Lance. Yeah. That's right. We would -- I think we would expect to see sequential improvement, and we would expect to see, as you say, against the softer comps of 2020, growth coming back in the second quarter. I mean, what we're seeing in Europe to elaborate a little, is that I think governments just towards the end of December, in the major markets that we operate in, got super cautious as the virus mutated and as they saw infection rates rise. And we've either had significant restrictions or further restrictions imposed. And I think now as the vaccines are distributed and in my own country, the U.K., we're now at more than 25% of the adult population vaccinated. You are starting to see levels of confidence returning in terms of government restraints. And we know from what we saw back in Q3 that as those restraints are lifted, as our audiences return to the street so our advertisers come back. And just this week, anecdotally in the U.K., the announcements were made by the government on Monday and Tuesday, the volume of calls from advertisers and the sentiment of a pipeline filling up was pretty palpable. So, you find us in a reasonably optimistic mood, I'd say, for the second quarter. But there's no question that Q1 has been tough with those further lockdowns.

Okay. And then I just wanted to ask you about the cash position. We had actually been thinking -- and it sounds like the first quarter is kind of the trough from an operational standpoint. But from a cash balance perspective, we at least had been thinking that would come a couple of quarters later in part, because of the timing of interest payments, but also in part because of those rent deferrals unwinding that we talked about earlier. Could you talk about -- what are your expectations in terms of the timing? And again, I know no one has a crystal ball, but based on at least what you're seeing now, should we still be thinking about sort of like 3Q cash trough, or is that harder to tell at this stage?

I think, it's still a challenge. We are seeing positive signs of recovery. And we're optimistic and we also feel very comfortable that our assets are quite resilient. And we saw some of that in Q3 and the first part of Q4. But it's tough to really to predict where things will be further out in the year. I think directionally, you're thinking about it the right way and it's consistent with the way we think about it. As we start to pick up, particularly in the second half in the year, I think on an operating basis, free cash flow will definitely improve and should be neutral to positive. I think, on a fully levered basis because of our significant debt service, that will take a little longer and we'll need to get back to pre-COVID type levels. There's a lot of things in that mix. And so, it's really tough to put a stake in the ground on timing. But I think directionally, it sounds like we're thinking about it the right way -- the same way.

Is there a minimum cash level at which you would feel the need to take steps to raise additional capital?

There is. We think of the $150 million to $200 million kind of on a consolidated base cash level as one where -- as we would have forecast that point to being around that level, we would likely start to plan for additional activities. Right now, we're comfortable where we are, but we always want to continue to update our forecast. Every week and day and month that goes by, we get -- we have more information and we want to be dynamic on that front.

Got it. Thanks, guys.

Thanks, Lance.

Our next question comes from the line of David Joyce of Barclays.

Thank you. Just a little bit more on the site lease renegotiations that helps the expense base there in the fourth quarter. Is there room for more of that? Or have you basically done all of the renegotiating you can? And I appreciate that you talked about the site leases being related to the revenue coming back later. But is there kind of like the deadline on when you -- on when that cadence might turn into as sort of a headwind on working capital? Or is it going to be pretty smooth?

Sure. I'll take a shot at that, David, and William and Scott can come over the top if they have anything else to add. I think the first part of your question is the lease negotiations that the operators continue to have or we done. The answer is no. I think as long as we have COVID impacted contracts, there's a conversation to be had. And it takes time. And the negotiations conclude and thus, the relief is lumpy for lack of a better word. So, you saw quite a bit of success in Q4, particularly in the European group. But that was efforts since Q2, dialogues with counterparties, negotiations, that type of thing. Those conversations continue. And you're having conversations about Q3 and Q4 impact. And again, I think those will continue -- maybe to a lesser extent, as time goes by. And certainly, as revenue starts to come back and these contracts start performing closer to the kind of intended terms, then I think it will be challenging. And so, I think the natural answer to your question is these will continue. The negotiations will continue and they will start to kind of funnel off as revenues start to return to normality.

And then on the revenue front -- I am sorry. Go ahead.

No. No. No. Go ahead.

I was just going to ask on the revenue side of the equation, have the contracts with the advertisers changed as a result of this, meaning have they become more fixed in nature? Or are they -- are they still as variable as they have been? Just trying to think of how the revenue has been holding up sort of better than some of our traffic data would suggest?

I'll let Scott or William address that question since it's advertising contract facing.

Yeah. I think, overall, I don't think the nature of our contracts have changed significantly. I think what has changed is the booking curve has changed and that bookings are coming in later than they were and advertisers are perhaps demanding greater flexibility than they were pre-COVID. But I don't think there's been a fundamental shift in terms of our contractual relationship with advertisers. No. Scott, have you seen anything in the U.S. to comment on?

No. It's the later contracts, shorter commitments, later buying. I mean, that's really what's happened.

Yeah. Yeah.

All right. Thank you very much.

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

Good morning. In the past, you've indicated an openness to asset dispositions. I was wondering if that is still the case? And if so, what are you currently seeing in the M&A market? Where I guess, are the holdups?

All right. So, I'll take that, and then Brian can add any further commentary. I mean, I would say -- I would repeat, I think what I said when I was asked a similar question last quarter, which is that we certainly remain open. The strategy that we talked about exactly a year ago on our earnings call around focusing on the higher margin U.S. business remains the case. But I still believe that right now, the valuation gap remains pretty significant. And that now would not be the time to look at any significant M&A activity. I think, we would want to see a more sustained recovery over a period of time before that became really a likely scenario for us. But the strategy remains the same. It's just that execution right now, I think remains challenging. Brian, do you want to add anything to that?

I agree with that, William. I mean, I do think that there is an increased maybe level of interest generally in the marketplace, but the valuation gap is going to be too wide until we start to see signs of a sustained recovery. So, I think, I totally agree with everything you said.

Great. And I guess, just one follow-up. On that valuation gap, is it more just the base year needing to kind of rebuild what the assets can do in terms of financials? Or is it a multiple problem in terms of what multiple people are willing to pay?

Frankly, it's both.

All about to say, I think it's probably a little bit of both, but I think it may be weighted toward who takes the recovery risk. And until you have a sustained level of EBITDA, people are going to discount that. And I think until that recovers, it's going to be a tough conversation.

Great. Thanks so much.

I would just add, I think everyone we talked to is very confident about the recovery in our sector and remain very full of belief for our sector. Remember, the sector was the fastest growing medium of all traditional media for the preceding five to six years pre-COVID. But I think what nobody can answer right now is what exact -- what the exact timing or shape of that recovery will be. So, until that becomes a little clearer, until our crystal balls improve a little, I think that it's unlikely you see a significant transaction. That's my view.

Great. thanks so much for the color.

We have time for one more question. Your last question comes from the line of Jim Goss of Barrington Research.

Thank you. A couple of questions. First, as you've alluded to advertising as a market share gain. And we follow a lot of broadcasters that have had a less severe or maybe a less severe reaction or a better recovery to this point than the outdoor sector has and in terms of domestic advertising. And I'm wondering what do you think might account for that? Is it your airport exposure? Or do you think it's the urban versus non-urban exposure? What are the factors that are building into the lesser degree of recovery you've experienced at this point?

William, you want me to take that one?

Do you want to take it? Yeah.

Yeah. Yeah. Okay. So, I think, there's a few things going on. I mean, first off, in any reporting from broadcasters, your 2020 numbers are distorted by political, which was a pretty big contribute -- contributor for that vertical, particularly in the latter part of the year. So...

No. That is clear. Besides political.

So, besides political. But the point I'd just start with is that. I think we are not a like-for-like buy with TV. It's not a primary comparison. So, it's a little bit of a tough bridge to build you exactly how the advertisers think about it. But I think a big thing you should keep in mind is that most of the agencies, many of the agencies are based in the biggest cities that have had the most advanced lockdowns in the U.S. And so, I know from our conversations with agencies and with advertisers, there is a perception gap around how mobile the country actually is versus how -- and this was particularly true earlier in the year. I think it has been less and less of an issue as time has passed. But the agency folks are working from home in Los Angeles -- they're working from home in New York. They're working from home in Chicago and they say, well, since I'm working from home, that must mean everybody is working from home. And so, I'm not thinking about buying out-of-home, but I'll buy TV, because everybody is watching more TV. Albeit, they're not watching linear TV, they're watching streaming, but that's a whole other ball of wax to get into. But I think you'll see as those folks start to come back to offices or start to see -- we're certainly spending a lot of time educating people on how much mobility there actually is. In the marketplace right now, I think you'll see things come back. But it really -- it's a hard one to give you a like-for-like decision, because I don't think that there are a lot of advertisers who are making a binary decision of do I buy out-of-home or do I buy TV. It's usually am I going to add out-of-home to a campaign that maybe has TV in it already or something along those lines with the perceived mobility, I think that's been a drag on us. And there is no question -- and you asked embedded in there, you asked about transit. I mean, I referenced before, the transit was down 300 bps in our percentage mix of revenue for 2020. And that it has not troughed as we reach that point. So, that's definitely contributing to it. And that's a perception plus a reality thing to a degree. Although, we did see pretty robust travel over the holidays. We saw pretty robust travel over President's Day weekend. And certainly, the average weekly volume is trending in the right direction. And I think that will be a conversation as recovery gets more firm that we're going to see go in the other direction. So, hopefully, that helps.

Okay. And one other thing. You made a very interesting point in your press release, talking about in the digital platform, delivering real-time content changes depending on audience traffic patterns, weather daypart and other relevant variables. That seems, obviously, digital can enable that sort of flexibility. I am wondering how much you intend to implement that? And what are the constraints in terms of parties owning specific placement rates, if somebody wants certain displays down a certain road. And does that factor against your ability to do what you're saying? Or are you shortening the time frames for digital versus static boards so that you can introduce this flexibility?

Yeah. I mean, it's something that we're managing all the time. It's probably how I would answer that to maximize the value that we get from our inventory. And so, there will be some advertisers who take a -- an accretive right on a particular board, but the majority don't and the majority -- on digital, the majority enable us to run the flexibility that we've talked about. And I think one of the few upsides of COVID is it has given us the opportunity to demonstrate to advertisers the greater flexibility that digital out-of-home delivers, both in the U.S. and internationally for us as well, it's become a very important part of our value proposition. And I think it's been really appreciated during the pandemic to be able to take particular dayparts or particular days a week and exploit that flexibility. So, yes. We obviously have to consider what -- other advertisers might want -- those advertisers who don't want that flexibility. We're making those judgments and balancing that to maximize the value of our inventory, wherever we operate.

So, I think, I should probably close it there and thank everybody for your questions and for your attention. As I hope I've managed to convey and with Brian and Scott's help. We recognize that this is a tough start for the year, but we also recognize that as of today, 25th of February, things are starting to look a bit brighter for the world and for our business as well. I think the execution of our team has been remarkable. I think, we've demonstrated the phenomenal strength of our asset. And insofar as one can, I do feel optimistic that not only will we return the business to year-on-year growth in the second quarter and beyond. But that we are resolutely focused on getting back to pre-COVID levels and that is the united objective for this business across the world. And we're seeing government lift restrictions, rollout vaccines and people get back on the highways and back into cities, the sooner our business will return to those pre-COVID levels. So, thanks again everybody for your interest and for your support, and we look forward to continuing the dialogue. Thank you.

Thank you. That does conclude the Clear Channel Outdoor Holdings Q4 2020 Earnings Conference Call. You may now disconnect.