Clear Channel Outdoor Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the 2020 First Quarter Earnings Conference Call for Clear Channel Outdoor Holdings, Inc. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. 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 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 an introduction and a review of our results, 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'd 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 risk 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 earnings conference call presentations. 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 three in the presentation, and I will now turn the call over to William Eccleshire.

Thank you, Eileen, and good morning, everyone, and thank you for taking the time to join today's call. I'd 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 investments 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 defer buying decisions and reduce 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 monitor the situation on a daily basis and flex our plans according to the latest market intelligence. We have therefore taken a number of actions to enhance liquidity, preserve our financial flexibility and support the continuity of our platform and operations including implementing extensive cost-saving initiatives. Brian will discuss the details of our plan in greater detail shortly, but be assured the actions we are taking are extensive. We are targeting over $100 million reduction in operating costs in Q2 and at least $25 million reduction in capital expenditures in the second quarter. Our focus is on positioning Clear Channel to manage through the economic downturn leveraging the work we have done to transform our business over the last year, as well as our ongoing initiatives to reduce costs and improve liquidity. Before going into more detail on the current environment and our response, I do want to provide some positive highlights from the first quarter. As we indicated in an earlier press release, the Americas segment, which accounted for approximately 70% of segment-adjusted EBITDA in fiscal year 2019, has delivered another strong quarter, with revenue up 8.5% and adjusted EBITDA up an exceptional 18.5% in the first quarter of 2020. This is on top of a 6.6% top-line growth in the first quarter of 2019, so truly delivering on our aspiration of growth on growth. Our investments in digital continue to drive growth, accounting for approximately one-third of the America's total revenue, and increasing 20% in the quarter. Additionally, as I have said, a key part of our strategy is to explore opportunistic transactions that help strengthen our balance sheet by improving our financial flexibility and enabling us to invest in the continued transformation of our business. In March, I was pleased to announce that following a strategic review of our investment in China, we reached an agreement to sell our 51% stake in the clear media business to a consortium called Ever Harmonic. A successful agreement to sell clear media demonstrates the fundamental strength of the out-of-home medium, even during difficult market conditions and at this most challenging period in China's recent history. We have formally accepted Ever Harmonic's offer and expect to receive the proceeds of approximately US$253 million later this month. We plan to use the net proceeds of approximately $220 million to improve our liquidity position and increase financial flexibility. The success that we achieved prior to the COVID-19 crisis could not have been accomplished without the hard work and dedication from our teams around the globe. With that said, we are now in an entirely unprecedented environment for our business. As a global organization, our employees, customers and suppliers have been impacted by COVID-19 in every country in which we operate. Our top priority is the health and safety of our employees in the face of evolving challenges. We have made an unequivocal commitment to make the well-being of our people, their families and their colleagues our first priority at this extraordinary time. And as we do so, our team continues to show remarkable flexibility and professionalism in adapting to the current environment. From our initial transition of employees to work from home in Italy in early March to a firm-wide global deployment by the end of March, our teams were able to make the shift seamlessly. And we're proud that our inventory has been able to facilitate messages of support to frontline medical teams, to first responders, to delivery professionals, and food service workers every day in all parts of our world, as well as being used by local and state and national governments to remind citizens to stay at home and how to stay safe. Looking ahead, our strategy remains focused on growing out-of-home share of total media spend by leading the technology-driven transformation of the medium and to grow our share of total out-of-home spending by leveraging our distinctive asset base. With that said, however, we have seen a significant decline in our customers' near-term demand given the current circumstances. The impact of COVID-19 with shelter-in-place protocols implemented around the world is significantly affecting the behavior and movement of consumers and target audiences. The scale and speed with which near-term demand has declined and requests to either defer or cancel current contracts is unprecedented. Our sales teams are working around the clock to protect revenue and doing what they can to alleviate the short-term impact. However, there can be no question that we are going to have a challenging revenue performance in the second quarter. Focusing first on the U.S., we started to see the downturn at the end of March. Fortunately, the quarter started off very strongly, and this mitigated the impact of the slowdown in the fall quarter. As the shelter-in-place rules expanded across the United States, our team quickly built a playbook to create a process for having customer conversations in a more consistent manner while focusing on landing on a solution that fits their unique situation. Our focus on the customer and our ability to understand the real need behind their request remains critical to our success. We're only one month into the second quarter, and given the uncertainty in the marketplace, it is difficult to extrapolate the declines in April into the full quarter and the balance of the year at this time. At this point, May and June also look challenging, but it's still too early to comment on the positive impact we may see as the markets start to reopen. I can't stress enough how diverse the impact has been around the U.S., which makes generalizing very difficult. From a customer group perspective, national declines more than local in April, and we're seeing substantial declines across all product lines so far in the quarter. Our strong foundation of iconic and permed inventory alleviates some of the downward pressure, but Q2 will certainly be a challenge quarter, and we are pulling all available levers to bring costs in line with declining revenue. Now moving to the international business. We're seeing an even more dramatic decline in customer demand in our European markets as a result of COVID-19. This is partly due to the earlier and more severe lockdowns imposed by European governments and also due to the nature of our city-based formats. We've already taken and will continue to take appropriate steps to ensure the continuity of our platform and operations to serve our customers as the European countries gradually reopen their businesses and lift shelter-in-place mandates. We started seeing the downward impact across some European markets in early March, in line with when government advice on lockdowns hit markets such as Italy, France and Spain. And that downward impact continued across all European markets through April. In France, our largest market in Europe, the lockdown was announced mid-March, resulting in a sharp downturn in advertising spend at the end of the first quarter, offsetting the revenue from the Paris street furniture contract. The lockdown has been extended to May 11th, at which time France plans to progressively lift restrictions on travel and business. In April, we experienced a substantial decline in revenue in France. In the UK, our second largest market in Europe, the team was able to deliver another quarter of top-line growth in the first quarter, driven in large part by our continuing investments in digital. However, with the country in full lockdown since the last week of March, the second quarter will be challenging. In April, the UK was down significantly. We expect to see some partial lifting of the lockdown by the end of May. It is still early in the quarter and we still don't know when and how the market will rebound from the impact of COVID-19. Throughout our Americas and international businesses, as well as at a corporate level, we are taking a highly disciplined approach in managing our use of cash through this period while preparing for the other side of this crisis. At the same time, are also taking the appropriate steps to help position us to effectively support advertising partners that will want to quickly take advantage of renewed opportunities for connection with their customers after lengthy shelter-in-place orders begin to relax. Our sales teams are in active discussions with our customers to develop advertising plans as restrictions are lifted. Importantly, we believe the technology investments we have made, specifically in expanding our digital footprint globally, and building out our radar platform in the U.S., position our businesses to meet our customers' needs as we all move through this unprecedented economic downturn. We're pleased that our customers continue to use radar as a vital tool, allowing brands to effectively plan and measure their out-of-home campaigns against specific audience segments. And in particular, for certain businesses, such as grocery stores or pharmacies, experience not only sustained activity, but an increase in overall visitations. In particular, we are leveraging our mobility data to gain greater insight into traffic patterns when consumers start returning to public life. And we believe the depth of our digital inventory provides the flexibility to quickly ramp up advertising campaigns and most effectively target the right audiences at the right time. It is, of course, still early, and we expect challenges as we work to better align certain aspects of our business to best serve our customers in this new environment. Above all, our team remains committed to executing our vision to deliver a leading platform in the industry, and I remain confident in the fundamental strengths of out-of-home, our distinctive portfolio of digital and printed displays, and Clear Channel's ability to drive long-term value creation when the economies rebound. Now I'd like to turn it over to Brian to discuss our first quarter 2020 financial results.