Clear Channel Outdoor Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Clear Channel Outdoor Holdings 2020 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, press star 0. I would now like to hand the conference over to your speaker today, Eileen McLaughlin. Vice President, Investor Relations, Clear Channel Outdoor Holdings. Thank you. Please go ahead.

Good morning, and thank you for joining Clear Channel Outdoor Holdings 2020 Second Quarter 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. 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. Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements. These statements include management's expectations, beliefs, and projections about performance and represents management's current belief. 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 findings 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, 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, 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 views as of today, August 7, 2020, and may no longer be accurate at the time of a replay. With that, please turn to page three in the presentation, and I will now turn the call over to William Eccleshire.

Good morning, everyone, and thank you for taking the time to join today's call. Once again, we're conducting this call remotely today, so please bear with us in case there are any technical issues during the call. I'd like to start by saying that I hope you and your families are well and safe. This has certainly been an unprecedented quarter for Clear Channel Outdoors, and indeed most businesses around the world, and it's one that I don't anticipate repeating. Although our sales were significantly impacted by the COVID-19 pandemic, we are pleased that we are now beginning to see improvement in travel patterns, consumer behavior, and economic activity in varying degrees across our platform. As a result, we are seeing sequential improvement in our business performance. In the third quarter, we expect consolidated company revenues percentage decline to be in the low 30s as compared to the same quarter last year, with Europe performing slightly better than the US as it emerges sooner from the pandemic lockdown. And as we consider the longer term, we're competent in our strategy and the resilience of our business. We believe that the strength of our liquidity position and our financial flexibility will continue to support the continuity of our platform, and operations through the current environment. Before I get into more detail on our business performance, I want to take this time to thank our employees for their resilience and commitment leading our business through this challenging period. I believe we as a company can feel proud of what we've done to manage through these unprecedented circumstances. Moving on to slide four, I'll provide an overview of our business, the current environment, and views on where the out-of-pocket is headed from here. Since March, the implementation of lockdown measures to slow the spread of the COVID-19 outbreak resulted in a significant decline in out-of-home advertising as our audience stayed inside and our customers deferred buying decisions and reduced marketing spend. In the U.S., revenue was down almost 40% in the second quarter as compared to the prior year. As you can see in the chart on the slide, based on GeoPath, the out-of-home industry organization that provides third-party traffic data, daily average miles traveled was down about half of where it was pre-COVID-19. In Europe, revenue was down over 6% as compared to the second quarter in 2019. With most of our markets in lockdown, our audience stayed home, as indicated in the chart on the slide, and our advertisers pulled back their spending. Anticipating the downturn, we focused on preserving liquidity, including targeting cost cuts of over $100 million and capital expenditure savings of $25 million to mitigate the impact to our business for the second quarter of 2020. Our team has fully delivered on these initiatives and achieved the target. We've taken additional steps to strengthen our liquidity. Brian will go into greater detail regarding our financial position shortly. But I do want to highlight that through the issuance of the new $375 million CCI BV Senior Secured Notes, we increased our available cash. If you include the net proceeds from this transaction, our cash increases to $975 million as of June 30, 2020. Importantly, we have not lost sight of a key part of our strategy to further improve our capital structure, pay down debt, and unlock shareholder values. As and when economies rebound, we will continue to evaluate potential transactions, including dispositions, as long as they clearly reflect the future value of a business or region. Our focus remains on continuing to own, operate, and enhance the value of our businesses in order to drive shareholder value. Now I will discuss what we're seeing in the third quarter, as well as actions we are taking to best position Clear Channel as economies in our markets begin to rebound. So far this quarter, we are experiencing positive customer activity, which is reflected in our guidance for revenue to be down in the low 30s, which is a material improvement over the second quarter, which was down 55% as compared to 2019. In the U.S., as you can see on the graph, traffic is back up to about 95% of the pre-COVID-19 levels in most of the country, with traffic on weekends closer to 100% of pre-COVID levels. according to Geopark. National advertising continues to be weaker than local. National advertisers have been very tentative about committing to major campaigns while the virus... So there are substantive conversations in flight. A key for this part of our business will be the fall up front. Many of our national advertisers set their plans for the following year. Print continues to hold up better than digital due to longer-term contracts. In Europe, as lockdowns have lifted, Many of our markets have seen a strong rebound in bookings from the historic lows of the second quarter, although we still have challenges as spikes in the infection rate continue to occur. As you can see on the chart on this slide, driving and walking is close to being back to pre-COVID levels, with transit still lagging. We are seeing the strongest return in bookings in countries where lockdown restrictions were eased the earliest, and where the emergence plans were well orchestrated. Switzerland, for example, was one of the first markets to reopen and has posted positive year-on-year growth in bookings for the past six weeks. We're also seeing improvement in France, and as restrictions in the UK are lifted, we're seeing a significantly improved pipeline compared to the second quarter. About two-thirds of our revenue in Europe is from street furniture and billboards, which is where we're seeing audience pick up fastest. Close to 15% is in malls and supermarkets. Supermarkets have remained stable throughout the pandemic, while malls have been slower to come back. Just over 10% of our European business is in transit, which has been slow to recover. As we emerge from lockdown, we're seeing various levels of bounce back in certain verticals in some of our largest markets in Europe. Notably, we've seen good bookings from advertisers in packaged goods, telecoms, and fashion and beauty. Travel, tech, and entertainment have been slower to return. We're cautiously optimistic about the future with the varying degrees of improvement in travel patterns, consumer behavior, and economic activity across our platform, combined with the positive customer activity we are experiencing. However, our visibility beyond the third quarter is limited, and it remains unclear when a sustainable economic recovery will take hold. We currently expect sequential improvement in revenue performance through the balance of the year, although at levels lower than 2019. Given the varying outlook by market, we expect to implement further cost savings initiatives, including permanent cost reductions, through the remainder of the year. Our continued focus is on aligning our operating expense base with revenues to provide additional financial flexibility as circumstances warrant. In addition, we will continue to be flexible and front-footed as we maneuver through the impact of the pandemic, working closely with our advertising partners and adapting in new ways that we believe will serve us well in the long run. Now please move to slide five. In the U.S., we have expanded our efforts to build direct relationships with brand owners, invested in tools to aid in the sales and lead process, and built out our technology to better serve our clients. Notably, radar is helping with the mobility data as audience levels picked up. We know where audiences are and how they are coming back. 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. Recently, we expanded our radar proof tool with two separate partnerships. We partnered with IHS Markit to improve auto marketing as U.S. travelers are expected to take more road trips this summer. Our radar-proof tool is now able to show auto dealers how their out-of-home ad campaigns deliver sales. In a recent campaign using radar proof, we were able to demonstrate a 15% increase in dealer brand sales driven by the out-of-home campaign. Working with Arrivalist, we are providing hospitality and travel brands with measurable consumer insights and in-depth performance analysis for their advertising campaign. In a campaign for a theme park, we were able to show that the out-of-home campaign drove a 66% average increase in visits to just one theme park. In technology, we're working with our partners to create deeper links to their buying systems, and we continue to enhance our programmatic value proposition. We've recently announced a partnership with PlaceExchange providing digital media buyers with programmatic access to Clear Channel Outdoors digital out-of-home displays through omnichannel BSPs. In Europe, we're continuing to focus on employing data and technology in order to enhance our revenue and campaign management tools. We've accelerated our ability to provide our clients with granular audience data and insights that accurately demonstrate audience exposure to individual advertising panels. Clear Channel Radar is now being tested in both the UK and Spain ahead of a simultaneous launch later this month. In the UK, we launched the Return Audience Hub with our data partners, AdSquare. The hub monitors a huge anonymized mobile data set to learn and openly share how the portfolio is delivering audiences compared to pre-lockdown levels. The hub also demonstrates how mobility behaviors have adapted and provides simple off-the-shelf solutions to help advertise and utilize audience hotspots. The hub has received fantastic customer feedback for its accessibility, accuracy, and simplicity. Additionally, as booking cycles have shortened, we've leveraged the flexibility of digital to respond to last-minute requests. Moving on now to slide six, we talked about our resilience during the crisis, but we also want to focus on the future and what comes next. More than anything during this process, we have learned the importance of flexibility and we remain optimistic about the long-term prospects for our business and our ability to return to growth. Out of home is favorably placed in a highly fragmented media market. We continue to believe, along with industry forecasters, that the out-of-home industry will continue to grow faster than traditional media, with digital out-of-home driving that growth. And with that in mind, we continue to believe that the technology investments made before the pandemic, as well as those we continue to make, specifically in expanding our digital footprint, will serve to better position our businesses to meet our customers' needs. And before I turn to Brian to discuss the financials in more detail, I want to highlight that our corporate social responsibility initiative remains an important part of our culture. Amidst the global health crisis, and calls for socio-political change we've seen play out in all corners of the world, we have reinforced our commitment to our people and to promoting diversity and inclusion, as well as the need to do more to continue improving and evolving as an organization. Most importantly, we remain committed to our vision to deliver a leading platform in the industry, and I'm confident that the fundamentals that I'd oppose, the strength of our portfolio, and the strategic steps we're taking to bolster our financial position will continue to support Clear Channel Outdoors' long-term performance and our ability to drive value. Now I'd like to turn it over to Brian to discuss our second quarter 2020 financial results.