Clear Channel Outdoor Holdings, Inc.

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. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you wish to ask a question during this time, simply press star then the number one on your telephone keypad. If your question has been answered and you wish to remove yourself from the queue, press the pound key. 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 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. 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 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 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 release and the earnings conference call presentation, which can be found in the financial section of our website, investor.cleartunnel.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 revenue, adjusted EBITDA, among other important information. For that reason, we ask that you view each slide as William and Brian comments on them. Also, please note that the information provided on this call speaks only to management views as of today, February 25, 2021, 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 Eccleshare.

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 vaccines, 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 downturns, and we fully expect this will once again be the case as we emerge from the pandemic. Longer term, the digital out-of-home sector is projected to grow at 13% compound annual growth rate from 2022 to 2025, according to data published by Magna Global in December 2020. We hope to capture a significant share of this growth, and we believe the actions we've taken during the past 12 months, from strengthening our liquidity and implementing cost restructuring efforts, to the adjustments we've made to our sales approaches, to the continued expansion of our digital platform and data analytics products, put us in a stronger position to return to revenue growth as the recovery ultimately takes hold. As we previously noted, while we continue to focus on carefully managing our expenses, we have begun to play offense. Throughout the pandemic, we have focused on strengthening our relationships with our advertising partners, with an emphasis on collaborating more closely with them as they tap into the flexibility and immediacy of our platform. We have increasingly utilized our radar suite of solutions to help our customers understand how their target customers have changed their movement patterns. In turn, we have sought to demonstrate our ability to deliver real-time content changes depending on audience traffic, as well as weather, day part, and other relevant variables. Overall, we are united across our organization in executing a clear strategic plan aimed at fully capitalizing on the fundamental strengths and growth drivers of our global asset base in order to unlock shareholder value. There are four key components that will continue to define our success now and well into the future, and we have continued to deliver progress across all of them. These imperatives include, first and foremost, we are continuing to invest in our business, including securing premier contracts and integrating the right technology to strengthen and expand the effectiveness of our assets. We continue to grow our digital footprint, and demonstrated effectiveness in dynamically targeting, influencing, and delivering audiences on the move. Complementing our digital portfolio, we've added to our data analytics capabilities and further strengthened our radar suite of tools through key partnerships in both the US and Europe. And we continue to expand our integration with programmatic buying platforms. All of these investments are aimed at monetizing our portfolio by delivering the data, targeting, and ease of ad placement that our customers increasingly appreciate. We also finalized our new contract with the Port Authority of New York and New Jersey during the fourth quarter. This venture is aimed at capturing the incredible potential of our platform and technology in a very big way as we emerge from the pandemic and audience travel begins to normalize. Second, we are focused on maximizing revenue by doing what we do best, partnering closely with our customers to deliver compelling advertising solutions, strengthening long-term relationships, and remaining agile and flexible. In the U.S., we're doubling down on our client direct selling initiatives and emphasizing selling creative ideas rather than specific billboard locations. Similarly, in Europe, we are working with advertisers and agencies to develop unique network solutions which exploit the flexibility of our mediums. These approaches, along with the integration of Radar's broadening suite of related data analytics tools, are supporting deeper conversations with brands who are selling the unique strengths of our platform. Third, we have remained diligent in prudently managing our cost structure and cash flow. These initiatives have included negotiating reductions in site leases, temporary reductions in compensation, and reductions in certain discretionary spending, as well as deferring capital expenditures. We've also moved forward with a restructuring plan to reduce headcount throughout our organization. And fourth, we are committed to maintaining ample liquidity and continually reviewing paths to strengthen our balance sheet over the long term. This includes the recent refinancing of a portion of our debt through the issuance of $1 billion in senior notes, which extended our maturity profile and reduced our cash interest expense going forward. Brian will provide more details following my remarks. The strength of our assets and our focus on remaining agile in terms of maximizing our inventory in a difficult environment was evident in the fourth quarter as we continued to pose sequential improvement in our performance. We delivered consolidated revenue of $541 million, down 27% compared to the prior year. Excluding China and FX, the decline would have been 25% in the fourth quarter, an improvement over the third quarter. In Americas, we delivered results ahead of our expectations in both sequential revenue and adjusted EBITDA margins. Our performance in Europe reflected the impact of the increased mobility restrictions as governments sought to contain the second wave of the virus. These results were also ahead of our expectations as we worked diligently to adjust our selling approaches and maximize our assets in an unprecedented and volatile climate. Similar to the third quarter, we saw promising signs regarding the resilience of our platform in select markets, particularly in the UK, where our business significantly outperformed the roadside market. We believe this reflects both the premium locations of our roadside inventory as well as the success of our digital screens, which generated close to 70% of our fourth quarter revenue in the UK. These results, as well as our progress in continuing to drive operating efficiencies, are certainly encouraging given the pandemic-related circumstances we have faced globally. I would like to call out all of our employees for their outstanding commitment to our mission and their contributions to our business during this extraordinary operating period. We truly have a first-rate talented team laying the groundwork to deliver improved results this year and beyond. Our people have adjusted brilliantly to new ways of working, and their productivity and commitment through the crisis have been outstanding. The many steps they are taking to further strengthen our operations while adjusting our approaches to serving our clients during the pandemic will pay dividends well into the future. Looking ahead, we will be facing a very tough comparable first quarter given our strong performance in the first three months of 2020 and the continued impact of COVID-19. This is also traditionally our smallest quarter in terms of revenue. Based on the information we have as of today, we expect America's segment revenue to be down in the high 20% range as compared to the prior year. The recent mobility restrictions in European countries following mutations of the virus have continued to cause significant volatility in our European segment booking activity. Due to this, for the first quarter of 2021, we expect Europe's segment revenue to be down in the mid-30% range as compared to prior year. Latin American bookings continue to be severely constrained as the pandemic's impact continues in all four of our markets in the region. Turning to our fourth quarter performance, in the America segment, while year-over-year revenue was down 25%, we continue to show a sequential improvement, which was better than expected. Local continues to show recovery, and we're seeing national rebounding with not only the number of sales RFPs increasing, but we're also seeing an increase in the size of those RFPs, which is certainly a good sign. As a reminder, in 2019, national revenue was up 9%. We've begun to gain traction with the large agencies and brands on the ability of the out-of-home medium to deliver results. They were, however, the first to pull back as the pandemic hit, but we're now beginning to rebuild interest with them, which bodes well as we exit the pandemic. In the U.S., programmatic purchasing grew encouragingly year over year during the fourth quarter, although off a small base, and we believe programmatic could grow substantially over time. We built a robust set of SSP partners and a rich network of more than 20 DFPs, providing avenues to sell our inventory alongside other digital media. Our early entry into programmatic relative to the rest of the out-of-home industry was positions us well as we work to introduce our platform and capabilities to a greater number of brands across the larger media buying universe. Europe's fourth quarter revenue adjusted for foreign exchange was down 23%. While our performance was ahead of our internal expectations due to the second wave of COVID and associated travel restrictions specifically in our largest market, France, we did not deliver sequential improvement. During the quarter, We continue to benefit from our strategic focus on roadside locations, which 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 has historically accounted for just over 10% of our European revenues. Similar to the Americas, one encouraging outcome of the pandemic is that in Europe, we have witnessed increased opportunities to demonstrate the flexibility, immediacy, and and creativity of our platform from multiple standpoints, including messaging context, contract flexibility, and the ability to use mobile data to better target specific audiences. Moving on now to our outlook for the Americas business. As I mentioned, we expect Americas to be down in the high 20 percentage range as compared to the prior year. This is slightly weaker than the fourth quarter due in part to the tough comps of 2020. as well as increased pressure on airports. As a reminder, in last year's first quarter, America's segment revenue was up 8.5% on 2019. We're heartened by the increased audience movement week trends that we're seeing. Our data is showing that travel has actually remained close to normal, with some weeks even exceeding the same week in the prior year. So audiences are back on the highways, and we have no doubt advertisers will ultimately come back to the markets. The encouraging news is that, similar to the fourth quarter, we are continuing to see an improvement in the volume and the size of RFPs, and it appears that advertisers are getting more confident and starting to plan for the future in a more structured manner. The beverage vertical continues to improve, with the restaurant vertical up versus prior year. But it's also clear that advertisers are continuing to delay decision-making and booking campaigns later, reducing our visibility. We're continuing to leverage our radar platform and expanded portfolio of partner tools to adjust to evolving travel patterns to maximize our inventory for our customers. And this is helping to strengthen our relationships and demonstrate the unique attributes of our platform. Turning to a review of the America's technology initiatives and new contracts. During the quarter, we continue to invest in the right technology, including increasing our digital footprint, strengthening our data analytic capabilities, and expanding in the programmatic space. We added 17 new digital billboards in the fourth quarter for a total of 74 new digital billboards in 2020, giving us a total of more than 1,400 digital billboards across the United States. We also continue to strengthen our radar platform through partnerships aimed at further improving our data analytics and directly addressing our customers' needs. We entered into a partnership with Vombora, the leading provider of B2B intent data. And out-of-home industry first, we are integrating Bombora's data with RadarView's audience insights, demographics, and location targeting. So advertisers can now understand how each of our display impacts more than 100 B2B audience segments, making targeting the B2B customer more accessible and measurable. Our partnership with Bombora follows the recent addition of partnerships with Tremor Video and GeoFast, which have also added to the integrated suite of solutions we deliver through Radar. As an example of the benefits of our technology investment, we leveraged our billboard presence in Florida and our RadarConnect mobile retargeting capabilities to deliver a campaign for game day vodka. The brand reported that the campaign was responsible for 65% of website traffic. and achieved a tick-through rate that was twice the industry average. As repeated case studies have shown, combining billboard ads with mobile is far more effective than just using one or the other. The success was such that Game Day Vodka was subsequently selected as an official committee sponsor by the Tampa Bay Super Bowl host committee. This relationship is a very powerful example of RadarConnect's ability to take our out-of-home footprint to another level through smart targeting of the right audiences at the right time. As I noted, we are continuing to expand in the programmatic space. Our programmatic platform introduces ease and efficiency to the out-of-home sales process by enabling marketers to buy our out-of-home inventory in audience-based packages, giving them a level of flexibility closest to the online platforms relative to other traditional ad mediums. As I've noted on previous calls, it's my firm belief that if you make something easier to buy, you inevitably grow your business. And our growing programmatic presence will certainly ensure that we continue to capture advertising dollars from other media and grow our share of the pie. Finally, we're off to a good start with our Port Authority contract. We have the inventory up and running on our platform and have begun selling ads. As we noted last quarter, the 12-year deal is the largest airport advertising contract in the U.S., spanning JFK, LaGuardia, Newark, and Stewart airports. With the addition of these tremendous airport assets, brands will have the unique ability to execute campaigns that reach a vast array of consumers as they drive, walk, or fly throughout a vast metro area. Despite the short-term challenges related to the pandemic, we remain confident in the growth potential of this contract. Looking ahead in Europe, where we're seeing a range of performances within our markets due to the resurgence of COVID-19 cases, new variants of the virus and related government restrictions, particularly in France and the UK. As I noted earlier, we expect Europe revenues to be down in the mid 30 percentage range as compared to 2020. Visibility into the remainder of the quarter continues to be impacted as some advertisers pause their activity pending greater clarity on the pace of the vaccinations and timing of market reopenings. In addition, advertisers are making buying decisions later in the buying cycle, which can delay bookings and impact our visibility. Having said that, it is important to note that the impact of current government restrictions remains well below the impact that we saw in March and April of last year. And longer term, as we've continued to emphasise, the resilience of the business is clear, and when audiences return to the streets, our out-of-home business will rebound soundly. At this point, we believe restrictions across our European markets will begin to lift this spring, and we're working closely with our advertisers to develop campaigns targeting audiences as they return. For example, in the UK, where the roadmap to lifting lockdowns was issued earlier this week, the expected rebound is being marketed as a renaissance moment, highlighting why out of home is better positioned than ever to help brands reach and engage audiences as they emerge from the restrictive stay-at-home orders. Turning now to our European technology investments, we continue to make progress in utilizing smart data to help advertisers plan and adjust their campaigns. Our sales team has integrated the radar technology in Spain and the U.K., and advertiser interest has been very positive, particularly as we demonstrate the agility of our platform in using aggregated anonymous data to target audiences as they return to the street. In Spain, we recently launched radar-driven campaigns centered on driving consumer interest for Disney Plus and CaixaBank. The Disney Plus campaign was for the miniseries One Division and targeted an 18- to 45-year-old demographic with interest in comics, cinema, and video games. And the CaixaBank campaign was for their Young ID product and targeted 14 to 30-year-olds with interest in music, museums, and other cultural locations in Barcelona. We're also rolling out a programmatic offering in Europe. Similar to the Americas, our programmatic offering will build over time, simplifying the buying process, providing us with additional revenue streams, and a growing avenue to leverage our scale and technology to target new advertising partners. Our digital footprint continues to expand in Europe. We added 545 digital displays in the fourth quarter and 1,244 in 2020 for a total of over 16,000 screens now live. Overall, we have a broad asset base in Europe, which is enabling us to develop and market scaled digital networks with a focus on roadside, which can be sold flexibly by time of day and day of week. This aligns well with rising advertiser expectations regarding our scale and the strength of our technology in targeting the right audiences on the move. I should also note that we recently secured several key contracts in Europe, including winning the bid to renew the Rome contract, covering bus shelters, pole banners, and stopping points across the city. And we've secured a renewal in Spain for the Madrid outskirts on January 1st of this year. As you would expect, The past year was not particularly active for big tenders given COVID, and several were pushed out to this year. Nevertheless, we were successful in securing these major contracts. So in summary, we are intensely focused on executing on our strategy, which is centered on strengthening our technology with the aim of fully monetizing our digital board and expanding our customer base. Notwithstanding the challenges we've faced, the pandemic has also presented us with a number of opportunities, to demonstrate the flexibility and immediacy of our platform with a broad range of advertisers as we look to deepen our relationships and accelerate our digital conversion. It remains early in the recovery, and as our markets gradually open up, we will continue to take steps to preserve our liquidity, including balancing the need to defer capital expenditures and reduce costs while still investing in strengthening our platform. Overall, We believe we remain in a strong position to capitalize as audience mobility increases, given the steps we have taken and continue to take throughout the global crisis. Now I'd like to turn it over to Brian to discuss our fourth quarter 2020 financial results.

Thank you, William.

Good morning, everyone, and thank you for joining our call this morning. As William mentioned, the past year was challenging, but 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. Taking together these initiatives and our improved cost structure places us in a solid position to benefit as the worldwide economy recovers. Moving on to the results on slide four. Before discussing our results, I want to remind everyone that during our GAAP results discussions, 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 ClearMedia in April of last year, and therefore our Q4 results in 2020 do not include ClearMedia. However, our results in Q4 and full year 2019 did include ClearMedia'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 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 big 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 America's fourth quarter results. The America 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 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 and 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. An 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 , 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's 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 the 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 in 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 continued 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 Outdoors 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 CCIVV 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 America segments, we completed our restructuring plans in the fourth quarter, and we expect annualized pre-tax 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 pre-tax 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 for 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 on to our financial flexibility initiatives, earlier this month, we successfully completed an offering of a billion dollars of seven and three quarters senior notes due 2028. Proceeds from the offering will be used to redeem 940 million of our nine and a quarter percent 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, giving us strength in the high-yield credit market, as well as our improving outlook. In addition, we've de-risked 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 the 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, America's 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 UK. 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 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 analytic 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. At this time, I would like to remind everyone, if you would like to ask a question, please press star, then the number one on your telephone keypad. If your question has been answered and you wish to remove yourself from the queue, press the pound key. Our first question comes from the line of Stephen Cahill 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?

Yes. Thanks, Steve. 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 UK, as I said earlier, before we saw 70% of our revenue is 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, you know, I can comfortably say we had our best programmatic quarter ever in Q4. So, we do see it recovering. I think, you know, Q1, we have a really tough comp, and that'll probably, you know, 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. 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.

Yep. 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 a – hey, 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 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, you know, our accrued 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 those challenging times. We've had a lot of success throughout the year. In the quarter, fourth quarter, we had 28 million of rent abatements and You know, that brought the year-to-date total as of December 30th to $78 million. So a lot of success on that front, both in the Europe and the Americas divisions. But there's 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 payments, and it will start to reverse kind of in the working capital plan.

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

Yeah, you know, 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, you know, as we see the recovery start to emerge and it's upward sloping trajectory is one where we don't think there'll be a setback. 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.

Yep. Thank you.

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

Thanks. Good morning. When you guys look into Q1, I'm 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 could 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? You gave some helpful guidance on cash interest in 22. 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 19. And so when you think about the dynamic of what's going on with our numbers, it was against a relatively COVID-free environment. 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. You know, Census was out in the marketplace. There are a couple 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, you know, 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, you know, is something that cost them about 300 bps in our mix for 2020. And, you know, 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 William started the call talking about 21 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, I agree. 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 restraints on movement right at the start of January this year. with the second or third wave of infections hitting the UK, France particularly. So it's probably been a tougher quarter than we expected. But I would say there are very positive indications this week and beyond as we start to see a clear route out of those lockdowns announced by governments across Europe and pipelines 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.

And then, Ben, on 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 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've kicked out our maturities on our bonds, our prepayable debt becomes an important feature for us. And so we have maintained a certain amount of prepayable floating rate interest debt, and that's about a little over a third of the total balance. Gotcha. Thank you.

Your 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 that would be the case. And then, William, you know, I heard your comments, but was that also 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 prompts, but how about on a sequential basis? 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 home country, the UK, we're now at more than 25% of the adult population vaccinated, you're 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 streets, so our advertisers come back. And just this week, anecdotally, in the UK, the announcements were made by the government on Monday, and Tuesday, the volume of calls from advertisers and the sense of a pipeline filling up was pretty palpable. So you find us in a reasonably optimistic mood, I would 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 that would come a couple of quarters later in part because of the timing of interest payments, but also in part because of those red deferrals unwinding that you 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 a 3Q cash trough, or is that harder to tell at this stage?

I think it's still a challenge. You know, we are seeing positive signs of recovery, and we're optimistic, and we also feel very comfortable that our you know, our assets are quite resilient and we saw some of that, you know, in Q3 and the first part of Q4. But, you know, it's tough really to predict, you know, 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 laws. 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 Sounds like we're thinking about it 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 to $200 million on a consolidated base cash level as one where As we would have forecasts 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 have more information, and we want to be dynamic on that front.

Got it. Thanks, guys. Thanks, Lance.

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

Thank you. Just a little bit more on the site lease renegotiations that helped 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 a a deadline on one when you on when that cadence might turn into it uh it's sort of a headwind on uh into working capital or is it going to be pretty smooth sure i'll i'll take a shot at that david and and you know william and scott can come over the top if they have anything else to add

I think the first part of your question is, you know, the lease negotiations that the operators continue to have, are we done? The answer is no. I think as long as we have COVID-impacted, you know, contracts, there's a conversation to be had. And it takes time and, you know, 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 impacts. 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 their 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 on the revenue front, 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 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.

Overall, I don't think the nature of our contract has 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 were 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. Bob, 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 Stefan Bisson of Wolf 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 and where, I guess, are the holdups?

So I'll take that, and then Brian can add any other commentary. I mean, I would repeat what I said when I 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, you know, 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 and 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?

It could frighten me a bit. I was about to say, I think it's probably a little bit of both, but I think it may be weighted toward, you know, who takes the recovery risk. And until... You know, 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, you know, I think everyone we talk to is very confident about the recovery in our sector and remains very full of belief for our sector. Remember, this sector was the fastest growing sector 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 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'll see significant transactions. That's my view.

Great. Thanks so much for the call.

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 alluded to, advertising is a market share game, and we follow a lot of broadcasters that have had a less severe or maybe a a less severe reaction or a better recovery to this point than the outdoor sector has 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 to this point.

William, you want me to take that one? 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 contributor for that vertical, particularly in the the latter part of the year.

So that's clear, but besides political.

So besides political, but the point I just start with is that I think, you know, we are not a like for like buy with TV. It's not a primary comparison. So it's a little bit of a it's a little bit of a tough bridge to build you exactly how the advertisers think about it. But I think that 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's working from home, and so I'm not thinking about buying out of home, but I'll buy TV because everybody's 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? And with the perceived mobility, I think that's been a drag on us. And there is no question 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 had not troughed as we reached 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'll be a conversation as recovery gets more firm, that we're going to see it 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, day part, and other relevant variables. That seems obviously digital can enable that. that sort of flexibility. I'm wondering how much you intend to implement that and what are the constraints in terms of parties owning specific placement rights? If somebody wants certain displays down a certain road, 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 is 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 an exclusive right on a particular board, but the majority don't. The majority are digital. The majority enable us to run the flexibility that we've talked about. And I think one of the One of the few upsides of COVID is it has given us the opportunity to demonstrate to advertisers the greater flexibility that digital at-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 day parks or particular days of the 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, but 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 assets. 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 the sooner governments lift restrictions, roll out their 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.