Clear Channel Outdoor Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the 2020 Third Quarter Earnings Conference Call for Clear Channel Outdoors Holding, Inc. At this time, all participant lines have been placed in a listen-only mode, and later we will conduct a question and answer session. To ask a question at that time, simply press star, the number one on your telephone keypad. To withdraw your question, press the pound key. As a reminder, today's call is being recorded. 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 Third 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, Inc., who will provide an overview of the third quarter 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. 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 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 release 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 release and the earnings conference call presentation, which can be found in the financial sections of our website, investor.clearchannel.com. Please note that our earnings release and the slide presentation are also available on our website 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 in this call speaks only to management views as of today, November 9th, 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. This is our third quarter conducting the call remotely, And once again, we ask that you bear with us in case there are any technical issues during the call. It has certainly been an unprecedented year for many of us. And like you, I'm sure we continue to feel the impact of the COVID-19 pandemic on our business. But in the past quarter, we've also seen how robust our business is and how strongly it recovers as and when some kind of normality returns. We delivered better than expected consolidated revenue in the third quarter. with reported revenue down 32% compared to the prior year, a substantial improvement compared to the 55% decline we reported in the second quarter. Excluding China and FX, the decline would have been 27%, better than the low 30% decline guidance we had provided in early August. Our performance in Europe was better than anticipated and well demonstrated the resilience of our medium. As audiences returned to the streets, our advertisers returned to our medium. U.S. performance also showed sequential improvement and was in line with our expectations. At the same time, we continue to implement initiatives to align our operating expense base with revenues. Brian will expand on our cost-saving accomplishments in more detail later in the presentation. As a whole and in the context of the pandemic, the results in the third quarter, especially in Europe, were certainly encouraging. We are continuing to leverage our investments in digital screens, in technology, and in our footprint to manage through the crisis and ensure we have the flexibility to deal with the uncertainty as governments across all our markets deal with the ongoing challenges of COVID-19. Our focus on continued investment for long-term growth is well demonstrated by the recent announcement of our winning the contract for the rights to advertise in the New York and New Jersey airports. We are proud and excited to have won this significant tender, and I congratulate Scott Wells and his team in securing it. I will talk later in more detail about the contract and our confidence in its value to our business. Now, as we look ahead, based on the information we have as of today, we expect a slight sequential improvement in the Americas revenue and adjusted EBITDA margin in the fourth quarter. However, we are not able to provide fourth quarter guidance for our European segment. The recent mobility restrictions in our European markets, most notably in the UK and France in the past 10 days, have created volatility in customer booking activity, significantly limiting our visibility. Before moving on, I want to take this opportunity to highlight and thank our employees for the amazing resilience and tremendous discipline they've shown this quarter and since the pandemic started to impact us in March. I'm proud of the incredible work our team has done and continues to do to reinforce our solid foundation and drive operational efficiencies in the face of rapidly changing business conditions. Moving on, I'll provide an overview of our business, the current environment, and views on where we see the out-of-home market going from here. So please turn to page four. In the America segment, year-over-year revenue was down 32% in the quarter, which is an improvement compared to the 39% decline reported in the second quarter. Our America's business is centered around the top 20 markets, which contributed to the significant growth we were delivering up to and including the first quarter of this year prior to COVID-19. However, even though our audience levels are returning to normal, the largest markets in the top 20 are those most impacted by advertisers pulling back on out-of-home spending, especially on the East and West Coast, where national advertisers are most likely to be focused. Please turn to page five. Europe's reported revenue was down 13% against prior year, and excluding foreign exchange adjustment was down 18%, which, as I noted at the beginning of my remarks, is a substantial improvement compared to the 62% decline we saw in the second quarter. The improvement in digital, which accounts for approximately 30% of European revenue, and declined significantly 17%, excluding FX impact, was even larger due to the speed at which advertisers were able to launch campaigns as business quickly returned once knockdowns were eased. As I've stated in the past, our investment in digital is a key component of our strategy. Our digital network is a dynamic medium which enables our advertisers to engage in real-time, tactical, contextual, and flexible advertising. I'd call out the strength of our sales team across Europe, who've done an excellent job responding with agility. As markets opened up, our audiences were moving around again, and advertiser interest returned. We also benefited from our strategic focus on roadside locations, which historically account for about two-thirds of our total European revenue and are far less affected by COVID-19-driven restrictions than the transit environment, which account for approximately 10% of our European revenue. Our UK business was a great example of this, where about 80% of revenue is historically from roadside inventory. Since mid-July, up until the recent announcement of new restrictions, our customer booking activity actually exceeded bookings made in the same period last year. Moving on to page six and the Americas business. With the outlook in the Americas improving, we remain cautiously optimistic for the near term. Our longer-term focus remains on returning to growth, which we believe we can achieve in 2021. As we enter the fourth quarter, our visibility remains limited. However, we have shifted from playing defense to playing offense, leveraging the investments we've made and continuing to make in technology. Even with the uncertainty created by the recent COVID-19 spikes, we believe our organization is in a stronger position to manage through the instability in the market. In light of that instability, we have expanded our client direct selling initiatives. Our focus is on selling creative ideas as opposed to specific billboard locations. As advertisers work to realign their advertising campaigns, we have found that CMOs are more willing to jump on a Zoom call to hear a great idea. Our ability to get a foot in the door is improving all the time. We continue to demonstrate to advertisers how our radar suite of solutions can help us help them. The audience levels are returning to normal, but travel patterns have changed. Audiences are spending more time close to home and less time in city centers, but they're still out and about. With Radar, we're able quickly to adjust to these new travel patterns to help our customers understand the best inventory and roadways on which to reach their customers, retarget those customers via a mobile ad, and measure the success of the campaign. More specifically, in the fourth quarter, we are seeing continued sequential improvement in our business. For the first time since March, we've beaten comps in a number of weeks so far this quarter. In our national business, the number of RFPs is improving and is close to 2019 levels. Local continues to improve, and we're seeing continued strength in our permanent inventory. We're currently in the renewal season, and most are keeping their locations. That said, we are still waiting for more data to better understand the strength of the holiday season relative to previous years as advertisers continue to delay buying decisions. Our largest category, business services, is holding up well and is performing at levels equal to last year. We're seeing increases in beverages with continued weaknesses in amusements and entertainment. Additionally, our revenue generated by our programmatic platform has rebounded faster than the rest of our business, although programmatic is still a small percentage of total revenue. Moving on to page seven for a review of the America's Technology Initiative and new contracts. During this past quarter, we continued to invest in technology and our digital footprint in America. We added 19 new digital billboards this quarter for a total of 57 new digital billboards this year, giving us a total of more than 1,400 digital billboards. We also partnered with Tremor Video to enhance our radar offering, which now provides advertisers a coordinated out-of-home and all-screen video solution that seamlessly extends into TV, digital or social video campaigns that reach consumers when and where they're ready to engage with brands. This is just the latest of enhancements to the radar suite, and we expect to continue to add customer-friendly capabilities to radar in the coming months. In addition, our data analytics capabilities expanded with our recently announced rollout of a new audience impressions methodology for airport advertising. Developed in partnership with the industry measurement body GeoPath, this innovation provides advertisers a more precise understanding of consumers' advertising journeys and behaviors as they traverse airports. The new methodology marks a shift from measuring campaigns solely based on passenger count towards a more robust understanding of audience behavior and consumers' likelihood of being exposed to advertising in airports using the same GeoPath data that is used to measure audiences in the traditional roadside out-of-home sector. The data will become available to advertisers through GeoPath as well as through radar. As I mentioned at the start, we are also delighted that the Port Authority of New York and New Jersey Board has awarded us the largest airport advertising contract in the U.S. to transform JFK, LaGuardia, Newark, and Stewart Airport into world-class digital media platforms. This is a landmark win for us and demonstrates our confidence in the underlying fundamentals of our business and our focus on long-term profitable growth opportunities beyond the temporary impact of the pandemic. The contract is for 12 years and is contingent upon execution by both parties, which we expect to occur in mid-November. We anticipate the contract will go into effect December 30, 2020. We worked with the port authorities to align our interests with contract terms that set the stage for both parties to achieve their goals under the current conditions and for years to come. And it has the potential to become the new industry model. The deal contains a two-year transition period to account for the impact of COVID-19 and the traffic recovery at Port Authority airports. The actual mag due each year, as well as capex spend, after the two-year transition period will be dependent upon total passenger traffic. The Port Authority of New York and New Jersey airports are gateways to the world, and as the region and travel recover, we believe our team is best suited to lead this historic transformation. With the addition of these high-value marquee airport assets to our footprint, brands will have the unique one-stop shop ability to execute campaigns that reach consumers as they drive, walk, or fly throughout the New York and New Jersey metro area. Moving on to page eight in Europe, where we are seeing a range of performances within our markets due to the resurgence of COVID-19 cases. As I noted earlier, historically about two-thirds of our revenue in the region is generated by our roadside displays. In October, we continued to see strength in our street furniture and billboard inventory, given the audiences were still on the streets, in contrast to continued weakness in transit. Our largest categories, FNCG and retail, improved sequentially. In addition, fashion and beauty are benefiting from the holiday season. However, our visibility into November and December has been impacted by the spike in new cases and new restrictions, which have led some advertisers to pause their activity. Of course, we're keenly aware of the recent developments around the second wave of COVID-19 in Europe, and we're monitoring these closely. While the new restrictions and the uncertain environment will impact our business in the near term, they're not expected to last as long, nor are they as limiting in terms of movement as those we saw back in March and April. As a result, we believe this second wave will have a much smaller impact on revenue in the fourth quarter than it did in the second quarter. More importantly, the resilience of the business is clear. When audiences return, out-of-home business comes back strongly. And as I said earlier, in the UK and elsewhere, we've seen bookings equal or better the prior year in many weeks during the past quarter. Turning to our European technology investments on page nine. In Europe, we continue to help brands navigate the audience and environmental impacts of changing COVID-19 restrictions through the application of smart data. For example, the UK's return audience hub has become a go-to planning portal for advertisers. As I mentioned last quarter, 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. Clear Channel Radar is now operational in both Spain and the UK and has further strengthened our ability to help brands engage audiences effectively as mobility patterns evolve. We're seeing early benefits from our implementation of radar. For example, in Spain, we've booked campaigns for PepsiCo using proximity to stores and more targeted audience demographic and behavioral data, being able to respond to new audience behaviors and mobility patterns through the changes we're seeing as a result of COVID-19. We continue to expand our digital footprint this year, adding 383 digital displays in the third quarter and 699 year-to-date for a total of over 15,000 screens now live. As we continue to expand our digital reach across European cities, we are well positioned to deliver increased flexibility and enhance contextual relevance at scale, improving our ability to meet brands' needs. This is evidenced by the improving digital revenue trends in the third quarter. Throughout our digital transformation, we are committed to making Clear Channel inventory more accessible to both new and existing advertisers. As in the U.S., we are developing our programmatic capabilities at an increased pace while securing and expanding partnerships with a number of leading supply-side platform partners. Most recently in Spain, we successfully ran our first fully programmatic campaign for Carver and Cupra in partnership with SSP Broadside Reach. Broadside Reach is already live across Holland and Switzerland. In the U.K., we just announced a new programmatic partnership with SSP Highstack, Across Clear Channel Outdoor, we strive to create products and provide services that excite and engage our consumers, communities, advertisers, and business partners. As a result, we believe we are well positioned to return to growth in 2021. At the same time, we recognize the pressures of the current environment, and we will continue to take steps to preserve liquidity, including balancing the need to defer capital expenditures and reduce costs while still investing in strengthening our platform. Now I'd like to turn it over to Brian to discuss our third quarter 2020 financial results.