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.