Ladies and gentlemen, thank you for standing by. Welcome to the Clear Channel Outdoor Holdings, Inc. 2023 Fourth Quarter Earnings Conference Call. [Operator Instructions] A question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Eileen McLaughlin, Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining our call. On the call today are Scott Wells, our CEO; and Brian Coleman, our CFO. They will provide an overview of the 2023 fourth quarter operating performance of Clear Channel Outdoor Holdings, Inc. and Clear Channel International BV. We recommend you download the earnings presentation located in the financial section in our Investor website and review the presentation during this call. After an introduction and a review of our results, we'll open the line for questions, and Justin Cochrane, CEO of Clear Channel UK and Europe; and Dave Sailer Dave Sailer, CFO of Clear Channel Outdoor Americas, will join Scott and Brian during the Q&A portion of the call. Before we begin, I'd like to remind everyone that during this call, we may make forward-looking statements regarding the company, including statements about its future financial performance and its strategic goals. All forward-looking statements involve risks and uncertainties, and there can be no assurance that management's expectations, beliefs or projections will be achieved or that the actual results will not differ from expectations. Please review the statements of risk contained in our earnings press release and our filings with the SEC. During today's call, we will also refer to certain measures that do not conform to generally accepted accounting principles. We provide schedules that reconcile these non-GAAP measures with our report or results on a GAAP basis as part of the earnings presentation. Also, please note that the information provided on this call speaks only to management's views as of today, February 26, 2024, and may no longer be accurate at the time of a replay. Please turn to Slide 4 in the earnings presentation, and I will now turn the call over to Scott.

Good morning, everyone, and thank you for taking the time to join us today. We generated consolidated revenue of $623 million for the fourth quarter, excluding movements in foreign exchange rates, reflecting a 10.8% increase as compared to the prior year and exceeding our fourth quarter guidance. Our results reflect a strong performance from airports in Europe North and improving business trends in the America segment with America returning to growth. Recapping the past year in our America segment, after a very encouraging upfront in the US, the theme for many of our clients was delayed decision-making, as they waited for signs of clarity on the direction of the economy. We also saw softness in select markets, particularly in the San Francisco/Bay Area, as well as in select categories, led by media and entertainment, technology and auto. These factors, combined with difficulty in fully staffing our local sales teams, made for a challenging year. The good news is that, in the latter part of the year, business started to improve with demand picking up after Labor Day and continuing into the current quarter. We're seeing some demand improvement in California. We have shown strong growth in the verticals we've been targeting, and we've made progress in hiring and onboarding salespeople in our local markets. While there is still some level of uncertainty in the market, advertisers are becoming more comfortable in making decisions and we're continuing to see improving trends in the current quarter across key verticals and markets. Our airports team delivered a record fourth quarter and an exceptional year after a slow start, driven by the investments we've made in digital, primarily related to the New York airports, but with strength across the portfolio. Advertisers are focused on premium inventory, which benefits our airports business with the strength…

Thank you, Scott. Good morning everyone, and thank you for joining our call. While it is my last time speaking with you in this role, I strongly believe we are transitioning with a lot of positive momentum, as you will soon hear about as we discuss the company's performance and expectations. Moving on to the presentation and Slide 5. As a reminder, Europe South is now included in discontinued operations. And during our discussion of GAAP results, I'll also talk about our results excluding movements in foreign exchange rates, a non-GAAP measure. We believe this provides greater comparability when evaluating our performance. Direct operating expenses and SG&A expenses, include restructuring and other costs that are excluded from adjusted EBITDA and segment adjusted EBITDA. And the amounts I refer to are for the fourth quarter of 2023, and the% changes are fourth quarter 2023 compared to the fourth quarter of 2022, unless otherwise noted. Now on to the fourth quarter reported results. Consolidated revenue for the quarter was $632 million, a 12.4% increase. Excluding movements in foreign exchange rates, consolidated revenue for the quarter was up 10.8% to $623 million. Income from continuing operations was $25 million, a decline over the prior year's income from continuing operations of $106 million. Consolidated net income of $26 million includes income from discontinued operations. Adjusted EBITDA was $190 million, up 9.2%. Excluding movements and foreign exchange rates, adjusted EBITDA was up 8.1%. AFFO was $73 million in the fourth quarter, up 30.2%. Excluding movements in foreign exchange rates, AFFO was up 27.3%. Now on to Slide 6, from the America segment fourth quarter results. America revenue was $299 million, up 0.5%, driven by digital deployments and programmatic growth. The business services and pharma verticals were up in the quarter, while auto and media and…

Thanks, Brian. Looking ahead, we remain focused on delivering profitable growth, strengthening our balance sheet and further demonstrating the operating leverage of our business. These efforts all reflect our priority to reduce leverage over the next few years. As our guidance indicates, we expect we will see growth in America after a lackluster 2023. We believe the recovery in some key markets, plus execution of our specific growth plans should provide that acceleration. We're committed to exiting Europe and Latin America at values consistent with the quality of these assets as we streamline our business and concentrate on our higher margin U.S. based assets. The work we've done already to strengthen our financial performance in Europe North puts us in a position of strength from which to work. As this is an active time in both processes, we will provide updates as and when we are able. I would like to express my gratitude for all the work our company wide team is doing. We're making good progress, operationally and financially as we continue our disciplined pursuit of cash flow growth. And now, let me turn the call over to the operator and Justin Cochrane and Dave Sailer will join us on the call.

Before we begin the Q&A this morning, Brian Coleman would like to make a quick statement, then move directly into the Q&A. Thank you.

Thanks Kevin. This morning we issued a press release announcing a refinancing transaction whereby the company intends to issue new senior secured notes to repay a portion of the company's Term Loan B facility and to extend the maturity of the remainder of the facility. Please note, that at this time we cannot comment further on these transactions. Additionally, while the company still plans to present at JPMorgan's 2024 Global High Yield and Leveraged Finance Conference on February [Technical Difficulty] make available on its investor website, a webcast or a replay of its presentation. Now, I will turn the call back to the operator for Q&A. Thank you.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Cameron McVeigh from Morgan Stanley. Your line is now live.

Hey guys, thanks for taking my questions. Just had a couple. I was curious if you hit the midpoint of the Americas revenue guide, should we see operating leverage flow through and see margin expansion?

Yeah. I think as we continue to see revenue growth, you should expect to see margin expansion in the business. I don't know, Dave, if you have anything additional add, but I think that's what we're kind of seeing and forecasting.

I think that's correct. I mean, when you think about our margins for our Americas business, as you get higher revenue, you will get a little bit higher flow through. So that last dollar coming in is definitely more advantageous than that first dollar. So you'll see slight margin improvement on that.

Great. Thanks. And then secondly, airports have been performing incredibly well recently. Could you discuss some of the growth drivers and how much of an impact general ridership trends have over digital conversions and then just budget share shift? Thanks.

Yeah, Cameron, I'll take that one. So I think there's a number of things going on with airports. I mean, obviously, we secured the New York, New Jersey Port Authority during COVID. So in the early part of 2020, we were negotiating that, we started operating it in 2021. And we completed build outs that we're lapping, we're in the process of lapping in the number of the airports, most notably Terminal A came online at the beginning of 2023, Terminal A in New your came online at the beginning of 2023. And so, Q4 would have been the first lap of that important new inventory. And so, I think there is that contract effect. The growth in our overall portfolio, we have the kind of extraordinary growth that we're lapping because of the build outs in New York, but the overall portfolio has performed very strongly as well. And that definitely correlates with the strong air travel. And I think it also correlates with the market trend toward really high quality, really well defined audience delivery. And we've seen that in the America business at the super premium end of that spectrum. So, there's a lot of factors going into it. I guess the last thing I'd give a call out, it's not just the large advertisers, the local teams have been doing really well and the local teams in conjunction with our roadside local teams as well. We cracked the code on cross selling between those businesses a couple of years ago and that's only accelerated and we're starting to do some pretty innovative things in terms of thinking about almost a sponsorship type of model in different geographies, particularly where we have roadside and airport inventory. That's pretty interesting. So we're doing some pretty innovative things in terms of how we're selling as well. I think those are all the factors.

Makes sense. Thank you.

Thank you. Our next question today is coming from Steven Cahall from Wells Fargo. Your line is now live.

Thank you. Scott, maybe to just follow-up on Cameron's first question and put a finer point on it. I think in Americas in 2023, you had some site lease expense that increased somewhat, idiosyncratically. Just trying to understand if there's anything in Americas that's also kind of one off in 2024? I think, typically, you've talked about the business is having about 50% fixed costs. So as we think about revenue growth in Americas in 2024, any good way to think about the fixed versus variable cost? And then, also I think you talked about cost reductions or cost optimization that you're looking at in the press release. Could you provide a little more color as to where we might see those? Is this either in airports or Americas? Is this proactively taking out some of the corporate costs as you move towards the divestitures? And then finally, is there any good way to think about EBITDA ranges for either Europe North or LatAm since those are now valuation basis in divestiture scenarios? Thank you.

Okay, Steve. I'm going to try to get all of these, but I'm sure you kept the list in case we miss any of them. On the one off, I do think [Technical Difficulty] clean year in America. We have lapped that site lease increase. I'm going to let Dave speak to where we are relative to one time abatements, but those largely washed out in the case of 2023. There may be a couple of things still lurking out there, but nothing that large. Dave, do you want to talk for just a second about the operating leverage?

Yes, absolutely. From an Americas standpoint, like the large contract that we have talked about, that has lapped. So as we get into 2024, I mean, you'll have a little things here and there around anything that's really going to structurally move your cost structure from a site lease standpoint, from abatements. From an airport standpoint, that's a little bit different. Those are still kind of trickling in. So when we're talking about airports, those margins will be slightly elevated. They were in 2023 and they will probably be again in 2024. Then I will expect those to kind of cycle out throughout 2024 and then that period will be over from a site lease standpoint for airports on abatements.

Thanks, Dave. And then the second question was around cost optimization. And I do think the principal cost optimization you'll see over the next 12 or 18 months with us, probably more toward the latter part of that window, because it'll take time as you unwind. But it's going to be related to corporate overhead, related to the divestitures we're talking about. And we've discussed before at least $30 million of savings. There's nothing we've seen that causes us to think not a good sort of zip code to speak to on that. And then in terms of the guide on Europe North and LatAm, because of everything that's in flight, I don't think those are numbers we're to give at this point. But if you look at the scale of what those businesses did, I mean, you've got a nice fresh 12 months in the K and you presume that their growth is -- Europe is going to actually revert a little bit, I think relative to what we saw in 2023. LatAm, the 2023 growth maybe a little closer to what we see, but those are not things, it just -- with the experience of moving things to disc ops and everything like that, the guides become so complicated when you start getting down into the sub segments, we just didn't think that that was appropriate. At some point in the not too distant future, it'll be a much simpler business to talk about. So, I don't know Dave or Brian, if you have anything you'd add on the Europe North or LatAm.

No, no, I think that covers it.

Great.

Thanks, Steve.

Thank you. Next question is coming from Jonathan [indiscernible] from TD Cowen. Your line is now live.

Thank you. Good morning. It's Jonathan on for Lance. My first one is on national sales and the composition ahead in American airports was better than 4Q last year. So given that there were some concerns with national throughout 2023, did you see national pickup towards the end of 4Q or towards the beginning? And is that trend also ongoing in 2024 so far?

Thanks, Jonathan. Yes, if you've listened to a number of calls, you know I always bristle a little at national, because it really correlates more to the channel that it's coming through the large advertisers than that it's truly national the way, the syndicated business in radio or television works. But for that large advertiser segment, we definitely saw some improvement toward the beginning of Q4 and it correlated with the advertisers that were using the programmatic toolset, the large advertisers using the programmatic toolset is where we really saw that first. And we have seen that continue into this year, but it's really not, national is kind of a poor description of it. It's really not. I think one of our partners describes national as airports plus New York and LA, which -- that doesn't really do national the way that I think other segments think of it. But the stuff that we call national is performing better than it was and seems like it's on a good trend line.

Got it. So on that note, can we also expect, let's say, the typical seasonality of every quarter building on each other or because is there perhaps a catch up on national that will occur sometime during the first or second quarter that can solve that typical seasonality?

Yeah, I'm not a 100% sure how to think about the idea of a catch up, because this is -- our numbers are comprised of 100 of campaigns. And I don't think most marketers wake up focused on, okay, I got to catch up the outdoor guys. I think what you ought to think about is, last year was a very choppy year. We had a really tough January and February. March and April were better, May June a little less good. Q3 was pretty tough throughout. And then as you got into September, it started to get better and Q4 was a pretty strong quarter. So as you think about how the business, it just was very choppy last year and I'm hoping that we don't have the same, especially not the kind of, hey, we're going to check out from June to Labor Day dynamic that a lot of those large advertisers had. But it's not for me to say precisely what they're going to do. When we think about our guide, we don't really build it at the advertiser level. We build it a lot more looking at the market, looking at the inventory position, looking at the inventory position, looking at what we're seeing in the local as well as the national, what's happening with our principal client investment in terms of key accounts. There's a whole lot of things that go into it. We don't really just build it off of a national court forecast, local forecast. I don't know Dave if there's more color you'd want to provide on how we get to that guide.

Yes. I mean, you covered most, but the other area I'd also talked about is just the geography of it. When you think about where we were last year and how Scott was talking about how the year kind of laid out, certain parts of the country, obviously, were weaker and certain parts were stronger. So as we get into this year, that all kind of plays into when we're setting up our guide on what parts of the country where we see a little more strength and as we're getting into the early parts of 2024. So I think that -- I don't look at it as like kind of like a bounce back, it's just more where does it get stronger across certain parts of the country and even certain verticals as well.

Got it. Thank you. And my last one is just on the litigation payment. I saw in the 10-K that $13 million was paid in October and the balance is expected to be sometime or I think in multiple payments throughout 2024. And can we expect, let's say, an even distribution throughout four quarters? Or is there perhaps a quarter that would be heavier in terms of that $13 million? Thank you.

I think all we've said is that, those payments will be made before the end of 2024. I think we probably haven't expanded upon that.

Thank you. Our next question is coming from --

Anything else. Thanks, Jon.

Our next question is coming from Aaron Watts from Deutsche Bank. Your line is now live.

Hey, everyone. Thanks for having me on. Brian, I will certainly miss peppering you with question on these call and other conferences even if you won’t miss that quite as much. So a couple of questions from me. I guess, first, just to clarify in your remarks around margins, given the moving parts you highlighted it, should we -- should it be a relatively stable walk this year as we head to that 25%, 26% context implied by your guide or will those factors or the choppiness last year cause some movement on a quarterly basis?

I mean, definitely from a quarterly standpoint, our margins will be different in certain quarters, probably a little bit lower earlier in the year and they get stronger towards the end of the year as -- just because you have more revenue in the second half. That's going to increase your margins. But I think that 25% you're talking about probably makes sense. Obviously, it breaks out different across -- our segments across America airports and Europe. But overall, I think that's fair. I mean, you'll see a little bit -- as I mentioned earlier in the call, you're still going to be getting relief on the airport segment. So that will be slightly elevated in 2024 and I think that will settle down as you get past 2024 from that cycle of relief.

Okay, helpful. And then on the housekeeping side, apologize if I missed this, but how should we be thinking about cash taxes for this year?

I wouldn't think of them too much differently than what we've seen in the past and that is fairly minimal cash taxes, mostly related to international and local sales and local taxes in the US. We have an election that we make that minimizes our federal income tax obligations and we would expect that. Now all that being said, Aaron, that doesn't include potential asset sales. We have made the statement that we believe that our European North sales would not attract any material cash taxes. Now that, of course, is dependent on how those sales are conducted. But as of right now, I wouldn't see any kind of significant change in our cash tax payments or the range.

Okay, perfect. And then last one for me and appreciate the time. You recently announced some changes to your Board. Just curious if that signals any change in the day-to-day operating motives for the business and/or kind of the future strategic direction for Clear Channel beyond the America centric focus you've been highlighting? Thank you.

Thanks, Aaron. I don't think that -- I mean, look, our Board is -- this is a challenging Board and having a good mix of perspectives on the Board is incredibly valuable. And I think that's how to read what maneuvering we have done. This is a business where because of our capital structure and because of where we live in the spectrum of media, you need to be able to think fast and slow and you need to have a long term plan coupled with a lot of agility to be able to go and do things like what we're doing with the refinancing that we're working on right now. Touch wood, we'll see as that process works out. And so, it's important to have fresh perspective on the Board and it's important to have people who understand the world in which you're operating. And I think that's the sum total of what we're doing with the Board.

Thanks, guys.

Thank you. Next question today is coming from Richard Choe from JPMorgan. Your line is now live.

Hi. I just wanted to follow-up on the Americas strength for the Q1. How much of that is coming from the digital programmatic trends versus maybe just kind of the rebound you talked about with regions in terms of, like Northern California and LA?

Thanks, Richard. The piece parts are all pretty intertwined. I mean, when you think about the first quarter that we had last year, the challenge was actually less in America than it was in airports, particularly the early part of the quarter. But no part of the business had a great start to last year. And so, coming out of the gate strong is very, very helpful. Programmatic is definitely strong, but interestingly last first quarter programmatic was actually quite strong as well. So it's not just that. I do think that some of the development work we've done on some of our emerging verticals. We have a couple of scale, new clients that we brought in directly that are coming online in Q1. So there's a number of things contributing to it. And just frankly getting past where we first started seeing trouble in Northern California in the latter part of 2022, really manifesting in the beginning of 2023. So we're lapping that and our numbers are not so large that that doesn't have an effect on it. So I think it's kind of all of the above. I wish it was a simple thing and I'd go do a lot more of that simple thing, but it's the combination of a number of factors.

And you mentioned pharma really kind of being a good growth driver. Is that skewed to Americas or airports a little bit more or does it help with both?

It is principally in America, right now where we're seeing the strength of it. I think it could translate into airports. But the real sweet spot of what we're doing in pharma are for drugs that have a very broad application. And that lends itself to the roadside asset even more so than airports where you get more of a segmented audience that's being delivered. So I think that's the -- it is definitely more skewed toward the roadside business.

Great. Thank you.

Thank you. Next question is coming from Jim Goss from Barrington Research. Your line is now live.

All right. Thank you. Kind of couple about airports first. The rebound in air travel seemed to come on pretty well, but it -- and it seemed to be more in terms of personal rather than business travel. So I'm wondering if that shift in mix in favor of personal versus business travel is still true? And does that impact demographics and/or pricing and the strategy of the ad should put on?

Thanks, Jim. It's a good question and there's a couple of things that go into it. First of all, I do believe that the rebound is still more skewed to personal than business, but you have seen international travel, including international travel Asia start to perk up, which oftentimes, I mean, I think one of the big trends, I've certainly seen a number of articles about this is people bundling business trips with personal trips, bringing family members along when they're going on an extended commercial trip and then tacking on a vacation. I think some of those dynamics are playing out, but we definitely have seen business travel rebound. It's probably not all the way back to where it was before pandemic, but I'm not sure how well we've ever really had -- how good the metrics are that are around that. In terms of how that translates, with the buy, it depends a lot on the customer -- on the client then you're talking about the advertiser you're talking about, because we have B2B oriented advertisers that target particular airports, particular terminals within airports or they go after the private jet FBOs and we have B2C products. And the thing about the B2B, oftentimes they kind of get to double dip, because they might be very focused on paying for that business traveler, which is a subset. Many of the people who travel for personal things are also business decision makers. And so you get both. So it is not a simple pricing discussion. It usually has a lot to do with the scale that you're going for, how many airports you're going for, how deep within those airports you want to get. There's a lot of factors that go into it beyond just the passenger counts and just the mix of personal versus business. But those trends are definitely helping support the great performance we're seeing in airports. I hope that answers your question at least a little bit.

Yes, that's good. It's good to get some thinking about it in there. I was wondering too if there are any potential airports up for bid, that might be available and of interest to you? And also, sort of maybe on a related note, does the duration of the contracts influence your CapEx decisions and strategies in those areas?

Yes. Dave, you want to take the CapEx? Well, you can talk about the bid too. You've got visibility to that.

Yes. No, I mean from -- yes, I mean if it's a longer term contract, yes, that will definitely go into it. It gives you a longer chance to kind of monetize those assets. So -- and if you're doing a 10 year deal and also depends the size of the airport, the available inventory. But on average you're probably going to spend a little more CapEx on a longer term deal than you're going to say it's five years. As far as contracts that are coming up, I mean, when you look at the airports across the US and there's airports coming up all the time. So we actively pursue, we'll look at each individual airport, does it make sense to fit into our portfolio? Do we think it's the strategy of what we're trying to accomplish within our airports division? And we're definitely going to look at them and then ones that make sense, we're obviously going to move forward. And there's airports that we feel don't fit exactly into our portfolio and we pass on them. But we're constantly evaluating them as they come up. But there's nothing material in the next 12 months in terms of renewals that we're facing. And I think one of the interesting things, we don't talk about this a lot, but as our airport results have been going up, our airport count has actually gone down, because we've been focusing on airports where we have greater network effect, airports where we have the ability to have roadside sales along with them, things along those lines. So we have been evolving the footprint of airports over the last several years and really trying to focus that capital on the places where we think there's the strongest return perspective.

Okay. And maybe one final one. You called out San Francisco in particular as one of those markets, not necessarily for airports, but just in general, that has had some challenges. I'm wondering if you look at that and some of the other markets around the country that have been under pressure, is there a rebound potential in those markets that might have the possibility of lifting some of your domestic billboard revenue and the rates of growth?

Yes, Jim, that's a -- it's a good question. I think as you think about, I don't think there's like a post COVID snapback, sort of scenario that you're going to see, that's going to cause our numbers to just take off. I think if that were to happen, that would be because of success we're having in some of the verticals that we're working or because the advertisers evolve their behavior, which can and does happen. I don't think it's necessarily just on the back of a regional snapback. But I do think just like throughout 2023, some regional challenges were headwinds for us. They could very easily become tailwinds for us if the commercial environment in those markets gets better. And if some of the underlying challenges get addressed, which I actually think they are particularly in Northern California. I think that you are seeing some political will being exerted and in some behavior to try to drive some change in some of the dynamics that have dragged those markets down. And being a longtime bull on California, I would not bet against our friends rebounding those markets. So -- but I don't think it's going to cause us to suddenly double our guides or anything like that. It's just not that, it's part of a much bigger portfolio.

All right. Thanks. And Brian, wish you well in this transition. You've been through a lot over the past 20 years. So congratulations on the success.

Thank you, Jim. Appreciate it.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Scott Wells for any further closing comments.

Thanks, Kevin. I appreciate it. Just on Jim's last point, the thing that I would just point to, we are a company that have our challenges on our balance sheet and we have our challenges where site lease goes up or things like that from time to time. But we are a company that is driven to excel and that does things right. And I view this transition from Brian to David as just a great leading indicator for everyone of our ability to manage multiple complex things at the same time. These two guys have done just a phenomenal job of collaborating and making the transition for the team go really, really well. And I want to call that to our investors attention, because it is important that our financial operations are seamless. We wouldn't be able to be going to market like we are right now if we had a choppy crazy transition going on. The fact that we were able to do this smoothly and still be in the marketplace and still be operating is a testament to the culture and the behavior of the company. So just thought it was important to call that out. And I thank you all for your interest and look forward to updating you as we have more information as 2024 builds.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.