Clear Channel Outdoor Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Clear Channel Outdoor Holdings, Inc. First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your touchtone phone. Please note this call may be recorded And I will now turn the conference over to your host, Eileen McLaughlin, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining Clear Channel Outdoor Holdings 2021 First Quarter Earnings Call. On the call today are William McElshare, 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 first quarter 2021 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 confirm 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 the earnings press release and the earnings conference call presentation, which can be found in the financial section 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 revenue and adjusted EBITDA, among other important information. For that reason, we ask that you view each slide as William and Brian comment on them. Also, please note that the information provided on this call speaks only to management's views as of today, May 10th, 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 Eccleshire.

Good morning, everyone, and thank you for taking the time to join today's call.

During the first quarter, we continue to execute on our strategic plan with the goal of maximizing our near-term performance while strengthening our ability to capture an increasing amount of advertising dollars as the global recovery takes hold. Our first quarter revenue results were in line with the guidance we previously provided and, for our American segment, reflected a tough comparison against our strong performance in the first three months of 2020, which was only minimally impacted by COVID-19. We delivered consolidated revenue of $371 million, down 32% compared to the prior year, excluding China and FX. Brian will walk you through the details of our first quarter performance following my remarks. Looking ahead, we remain encouraged by the progress being made with regard to the vaccination process and the increasing levels of mobility across many of our markets. as well as the positive sentiment we are hearing among advertisers. As expected, we are now seeing our business return to year-over-year revenue growth through the balance of the year, driven by the rebound in several markets. Most important, as a result of the strategic investments we are making in our business, we believe we are now in a stronger position to drive revenue growth as the global recovery gains traction. These investments are primarily centered strengthening our ability to monetize our growing digital platform as well as our print assets and elevate our value proposition amongst the broader universe of advertisers. Specifically, we continue to expand and integrate our radar suite of data analytics products into our portfolio while strategically increasing our presence in the programmatic space. We continue to deliver a greater and more valuable set of actionable insights to advertisers. while emphasizing selling creative ideas targeting specific audiences. Put another way, we are broadening our discussions with clients beyond just the locations of our outdoor footprint, but the value of specific audiences we reach with these assets. The pandemic has provided us the ability to demonstrate the usefulness of our data as consumer journeys change, agencies and brands seek to reach them in a seamless manner. As we focus on strengthening our ability to drive revenue growth, We have also remained diligent in managing our costs and cash flow. Brian will provide an update on our cost savings initiatives. Now let me provide a brief update on each of our business segments, beginning with America's. Based on the information we have, for the second quarter, we expect America's revenue to be between $265 and $275 million, with adjusted EBITDA margin improving sequentially from the first quarter. Entering May, we are seeing a notable uptick in bookings as advertisers become more comfortable with the prospects for a more sustained opening of the economy as the vaccination rates improve. Based on our data, we can see that audiences are increasingly out and about as the recovery unfolds. But there remains some lag between emerging mobility patterns and ad purchasing. We primarily attribute this to the fact that some key ad categories, such as amusements and restaurants, remain challenged due to capacity restrictions, but we believe they will pick up as the year progresses and restrictions are lifted. Further, while our transit business is seeing some improvement, it continues to lag in the recovery process, which is weighing on our performance. Comprised primarily of airports, this business is well positioned to benefit as travel volume increases. Looking ahead, we are continuing to see an increase in the number and value of RFPs, Categories showing particular strengths include beverages, insurance, and business services. We're also beginning to see an upturn in theatrical in the current quarter, which is a welcome sign related to the progress of the opening of the economy. An example of a big opportunity centered on maximizing the opening of the economy is reflected in our recently announced partnership with the Resorts World Las Vegas. In conjunction with the opening of the resort this summer and the return of convention activity, we launched three full-motion digital out-of-home displays, offering advertisers premium visibility on the Vegas Strip. They include the latest in cutting-edge digital signage and represent one of the largest exterior LED building displays in the US, delivering over 135,000 square feet of digital signage. With regard to our technology investments, we added 14 new digital billboards in the first quarter, 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 measuring the impact of our assets on consumer decision-making. We have strengthened our leading audience attribution solution, RadarProof, by partnering with Koshava, the leading real-time data solutions company for omnichannel attribution and measurement. Our innovative combined offering helps brands better understand out-of-home advertising's impact on key metrics, such as user engagement, website visits, and app downloads. This is the kind of compelling data that is enabling us to demonstrate the power of our platform in influencing consumers on the move. We're also continuing to make notable progress in the programmatic space. Revenue from programmatic increased year over year in the first quarter, albeit of a small base. Through integration with multiple SSPs, our digital Adafoam ad units are increasingly accessible to digital buyers via the same buy-side platforms that they utilize to spend their considerable digital budget. And while it's still early in our programmatic expansion, the progress we're making bodes well for the future. Turning to our business in Europe, based on the information we have today, we expect second quarter segment revenue to be between $200 and $220 million, excluding the impact of foreign exchange. As in the Americas, the pace of recovery varies across Europe, driven by differing rates of vaccination and variance in attitude to the virus in different parts of the continent. While some of our European markets are picking up momentum in terms of opening up, we're also continuing to see volatility with activity differing from country to country. In our largest market, France, the French government instituted additional mobility restrictions at the end of March, following an increase in virus cases and concerns over new variants, delaying the onset of the recovery to the middle of the second quarter. Restrictions have started to ease, with all schools now open and non-essential retail due to reopen on May 19th. Meanwhile, we are continuing to see promising signs in some of our other markets, particularly in the UK, our second largest market, where the phase three opening is well underway, supported by a countrywide vaccination rate exceeding 50%. Over the last six weeks, our UK business generated bookings ahead of the comparable period in 2019, as we benefit from pent-up demand among advertisers. Our UK business continues to benefit from the premium locations of our roadside inventory, as well as the widespread scale and audience reach of our digital networks. I'm proud to also note that our UK team was recently awarded Commercial Team of the Year at the coveted Campaign Media Awards. The judges recognized Clear Channel's outstanding performance linked to proactive programs focused on supporting advertisers through the unprecedented challenges presented by the pandemic. Looking at the rest of Europe, other countries that are progressing well in terms of opening up include Switzerland and Spain. As with the UK, we're seeing advertising spend recovering in these markets as infection rates drop and restrictions are eased. The overall sentiment among European advertisers is very positive, reflecting pent-up demand and the need to get in front of consumers. As with the rebound we started to see in the third quarter of last year, following the easing of restrictions, which proved to be temporary, we believe the ad market will rebound again as restrictions are waived in additional markets in the months ahead. Our digital footprint continues to expand in Europe. We added 355 digital displays in the first quarter for a total of over 16,500 screens now live. Supporting these assets, our radar rollout continues to receive positive customer traction in Spain and the UK. We're also testing radar in Sweden ahead of a launch in the current quarter with additional launches on track thereafter in France and Belgium. We're continuing to roll out our programmatic offering in Europe. We recently launched a branded programmatic proposition called Clear Channel Launchpad, which will serve as a customer gateway, connecting our premium digital out-of-home inventory to SSPs and digital buying platforms, bringing out-of-home into the omnichannel buying ecosystem. Clear Channel Launchpad is now live in the UK, Switzerland, Spain, Finland, and the Netherlands, with plans underway to introduce it across France, Italy, Belgium, and Scandinavia. Similar to the Americas, our programmatic platform in Europe will build over time, simplifying the buying process and providing us with an important avenue to leverage our scale and technology to target new advertising partners. So in summary, we remain committed to executing on our strategy to expand the revenue potential of our global portfolio and optimize our ability to take full advantage of the economic recovery. We're now seeing a return to year-on-year revenue growth in the second quarter, with indicators pointing to continued improvement in advertiser demand as the year progresses. Now I'd like to turn it over to Brian to discuss our first quarter 2021 financial results.

Thank you, William. Good morning, everyone. Thank you for joining our call. As William mentioned, as expected, the quarter has been challenging to the impact of COVID-19 on our business, as well as tough comparisons against our strong Q1 2020 performance in Americas. However, We are beginning to see a rebound in many of our key markets. We aren't back to 2019 levels, but it's certainly nice to see the improvement. We are also continuing to work on reducing costs and addressing our capital structure while investing in our business so that we are in a stronger position as our business begins to benefit from the improving economic environment. Before discussing our results, I want to remind everyone that during our GAAP results discussions, I'll also talk about results adjusted for foreign exchange. a non-GAAP measure. We believe this provides greater comparability when evaluating our performance. Additionally, we have expanded our disclosure to include more detail on America's revenue, including breaking out transit revenue. We have also added disclosure on site lease expenses in both the Americas and Europe segments. Moving on to the results on slide four. In the first quarter, consolidated revenue decreased 32.7% to $371 million. Adjusting for foreign exchange, revenue was down 34.8%. If you exclude China and adjust for foreign exchange, the decline in revenue was 31.7%. These results were in line with expectations. Consolidated net loss in the first quarter was $333 million, compared to a consolidated net loss of $289 million in Q1 of 2020. Consolidated adjusted EBITDA was negative 33 million in Q1 of 2021 as compared to consolidated adjusted EBITDA of 51 million in Q1 of 2020. Excluding FX, consolidated adjusted EBITDA was negative 27 million in Q1 of 2021. Please turn to slide five for a review of America's first quarter results. The America segment revenue was 212 million in the first quarter of 2021. down 28.4% compared to the prior year, with a decline in revenue across all of our products. National was down approximately 33% and local down approximately 25%. Revenue continues to be under pressure as a result of the impact of COVID-19, but also the decline was a bit higher than Q4 2020 due to the tougher year-over-year comparisons. As I noted earlier, the Americas team delivered an exceptional quarter in Q1 of 2020 with 8.5% revenue growth over the prior year. Direct operating and SG&A expenses were down 21.1%, due in part to lower site lease expenses, which declined 22.6% to 83 million, related to lower revenue and renegotiated fixed site lease expense. Additionally, compensation costs declined due to cost savings initiatives and lower revenue. Segment adjusted EBITDA was 64 million, down 40.5% compared to the first quarter of last year, with an adjustment EBITDA margin of approximately 30%. Please turn to slide six. As I just noted, we are now breaking out our transit revenue, which is primarily comprised of our airports business. Transit was down 61.5%, and airports decreased 62.4% to $20 million, while billboard and other was down 20.7%. Please turn to slide 7 for a bit more detail on Billboard and others' Q1 revenue performance. Print continues to be a bit more resilient than digital and was down 19.1% with digital down 24.2% from the first quarter of 2020. And on the slide 8, within transit, print declined 52.5% and digital was down 72.8%. Next, please turn to slide nine, and a review of our performance in Europe in the first quarter. As a reminder, the first quarter is proportionally to the smallest quarter of the year, given the seasonally low level of revenue. Europe revenue of 150 million was down 29.4%, and excluding foreign exchange, revenue was down 35.2% in the first quarter. As expected, The extension of mobility restrictions continued to delay the rebound, with the largest revenue reductions occurring in France, the UK, Sweden, and Spain. Digital revenue was down 38.9%, excluding the impact of foreign exchange. Adjusted direct operating and SG&A expense were down 11.6% compared to the first quarter of last year, excluding the impact of foreign exchange. Both direct operating expenses and SG&A expenses decreased in most countries in which we operate, with the largest decrease occurring in France, the UK, and Sweden. The largest drivers of the decline in direct operating expenses was lower site lease expense, which declined 10% to $93 million after adjusting for foreign exchange. The decline was driven by lower revenue and the renegotiated site lease expense. Additionally, SG&A expense was down due to lower compensation, attributed to lower revenue, operating cost savings initiatives, and government support and wage subsidies. Segment adjusted EBITDA was negative $62 million after adjustment for foreign exchange. This compared to negative $14 million in Q1 of 2020. Our Europe segment consists of the businesses operated by CCIBV and its consolidated subsidiaries. Accordingly, the revenue for our Europe segment is the same as the revenue for CCIBV. Europe segment adjusted EBITDA, the segment profitability metric reported in our financial statements, 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 $62 million during the first quarter of 2021 compared to the same period of 2020 to $150 million. After adjusting for a $12 million impact from movement in foreign exchange rates, Europe and CCIBV revenue decreased $75 million. CCIBV operating loss was 100 million in the first quarter of 2021, compared to 46 million in the same period of 2020. Let's move on to slide 10 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 $10 million in the first quarter down $9 million compared to the same period last year due to the impact of COVID-19. Direct operating expense and SG&A from our Latin American business were $13 million, down $3 million compared to the first quarter in the prior year due in part to lower revenue and cost savings initiatives. Latin America adjusted EBITDA with a negative $4 million. Moving on to slide 11 and a review of capital expenditures. Capital expenditures totaled $18 million in the first quarter, a decline of $18 million compared to the prior year period, as we continue to focus on preserving liquidity given the current operating conditions. Additionally, CapEx was also lower in part due to the sale of ClearMedia. On to slide 12, Clear Channel Outdoors consolidated cash and cash equivalents totaled $642 million as of March 31, 2021. Our debt was $5.6 billion, up slightly due to the refinancing of the senior notes, and cash paid for interest on the debt was $145 million during the first quarter. Our weighted average cost of debt was 5.9% as of March 31, 2021. Moving on to slide 13, as mentioned, we continue to focus on managing our cost base and strengthening our liquidity and financial flexibility. In April 2021, we revised the Europe portion of the International Restructuring Plan, which we began in the third quarter of 2020, primarily in response to the impact of COVID-19. We expect this plan to be substantially complete by the end of the first quarter of 2023 and estimate that total charges for the Europe portion of the International Restructuring Plan, including 10 million of charges already incurred, will be in the range of approximately 51 million to 56 million. Substantially, all charges related to this plan were or are expected to be severance benefits and related costs. We expect the Europe portion of the plan to result in a pre-tax annual cost savings in excess of $28 million. Additionally, we continue to work on negotiating fixed site lease savings and have achieved $23 million in rent abatements in the first quarter on a consolidated basis. We received European governmental support and wage subsidies in response to COVID-19 of 5 million in the first quarter. Moving on to our financial flexibility initiatives, as previously announced, we successfully completed an offering of 1 billion of seven and three quarter senior notes to 2028. We used the net proceeds from the offering to redeem 940 million of our nine and a quarter senior notes to 2024. Additionally, last week, we entered into a second amendment to the senior secured credit agreement, extending the suspension of the springing financial covenant through December 31st of 2021, and further delaying the step down until September 30th of 2022. Turning to slide 14 and our guidance. For the second quarter of 2021, America's segment revenue is expected to be in the range of 265 to $275 million. and adjusted EBITDA margins expected to improve sequentially over the first quarter of 2021, while our Europe segment revenue is expected to be in the range of $200 to $220 million, excluding the impact of foreign exchange. Additionally, we expect cash interest payments of $216 million in the last nine months of 2021 and $334 million throughout 2022. We expect consolidated capital expenditures to be in the $155 to $165 million range in 2021. We are optimistic about our prospects and may look to accelerate CapEx spending as appropriate to the balance of the year, commensurate with the slope of the recovery. We anticipate our consolidated revenue in the second half of 2021 to reach nearly 90% of 2019 levels, excluding China. The recovery is led primarily by our America's billboard business and a number of countries in Europe, including our UK roadside business. Lastly, we expect ending liquidity for 2021, including unrestricted cash and availability under the company's revolving credit facilities, to be approximately $425 to $475 million. But that could vary based on timing of cash receipt and or payments.

That concludes my formal remarks, and now let me turn the call back over to William. Thank you, Brian.

Looking ahead, we are encouraged by the pace of the vaccination process and the increasing levels of mobility that we're seeing across the majority of our footprint. In turn, interest among advertisers is returning, and we are seeing booking activity exceeding 2019 in several US and European markets, which bodes well for the year ahead. We remain focused on strategically investing in our technology, including expanding our digital platform and further strengthening our data analytics and programmatic resources with the aim of maximizing the potential of our digital board. As we elevate our ability to demonstrate the effectiveness of our assets in influencing consumer decision-making and continue to make our inventory easier to buy, particularly among digital ad buyers, we will look to expand our revenue growth potential. As we invest in our technology, we will also continue to take steps to carefully manage our costs and preserve our liquidity as we navigate the evolving macroeconomic climate and focus on driving profitable growth over the long term. And now let me turn over the call to the operator for the Q&A session.

At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. Again, that's star, then the number one. Your first question comes from the line of Stephen Cahill with Wells Fargo.

I think you might be on mute, Steve. Sorry about that. Yeah.

so thanks a lot for the color um you talked about the pickup in rfps and uh and theatrical could you give maybe give us a little bit of color on the america's division um how much revenue in this division these days is the large urban signage large urban areas spectaculars that sort of thing because i imagine that's where you're seeing a lot of this resurgence um so if you could maybe help put some color context around those large urban revenue areas and what sort of trends you're seeing And maybe the same question for Europe. And then, Brian, thanks for that financial detail. Maybe if you could dive a little bit deeper into what the covenant holiday means, if you're ending liquidity of 425 to 475, which I think I heard right, does that put you in compliance with the covenant? And does that include maybe some of your bank debt reduction or like revolver payback by the end of the year? Thanks.

Brian, you want me to take the Spectaculars one first?

Okay.

So, Steve, the question about theatrical is a good one. And just to clarify, they do buy Spectaculars, but that's not the majority of what they buy. They actually are big users of our digital networks and buy relatively deep into the footprint And so, you know, I don't think we disclose how big the Spectacular business is, but it's in that bulletin and other that was disclosed. It is definitely showing signs coming back, but it's not just theatrical that's coming back. I hope that gives you a flavor for it.

Maybe just in that context, is large city or sort of large urban area ex-transit starting to come back? We've seen that from some of our local TV companies.

Yeah, I mean, I think it's a mixed bag across the country, but it definitely is. And certainly as we look, you know, Q2 and beyond, we're definitely seeing that. I think the more you go south and the more you go east, You know, to somewhat smaller locales, the more robust things are. I mean, I think this will be a question you'll get, so I'll just answer it right now. We have about a third of our markets, not a third of our revenue, but a third of our markets trending to be ahead of 2019 this year. And I think overall we're expecting a very strong second half and really second quarter and second half, particularly on the traditional side.

Mm-hmm.

And Steve, I think you asked about Europe as well. I mean, I hesitate to generalize about the recovery in Europe because it really is very different country by country. If we were just talking about the UK, I think we'd be presenting a very positive picture as the bulk of the restrictions are being lifted almost by the day. And we're seeing the recovery follow that very closely. In other European markets, the The pandemic has taken longer to be cured, as it were. Restrictions have remained in place for longer. And so we haven't seen the speed of recovery that we're seeing in the UK. So it is a varied picture. What is consistent is that week by week, lockdowns are being lifted. And week by week, as those lockdowns are lifted, the revenue comes back and comes back pretty strongly. But it's going to be happening during the second quarter that that recovery is taking place. And so I think what I would say is if you average it out across Europe, April continues to be low. May is certainly moving more strongly. And by June, I think we're expecting to see in pretty much all of our markets that recovery taking hold. But I would think of the second quarter for Europe as a transitional quarter and then looking to a strong sustained recovery into the second half as the vaccination rates increase. But as I say, there's no such thing as one Europe in this situation.

And Steve, I'll jump in and answer the covenant question quickly. I think, you know, first I'd like to say we're pleased to deliver another amendment, and it certainly reflects the continued support of our bank group. So happy with that. The second thing I'd note is this is a springing covenant. So it only applies if there's outstandings under our cash flow revolver, which today there is. But what the second amendment means is there really is no financial covenant, which is a secured leverage test. until the end of the year. And in return, we'll continue to maintain a minimum liquidity of $150 million. So it's a continuation of the first amendment with respect to the secure leverage test. That test, when it's in effect, is 7.6 times. There is a step down to 7.1 times. And consistent with the delay in the application of the financial covenants, the step down has also been delayed it's been delayed till september 30th of 2022. so again pleased to to report um the the second amendment and i think it you know it's kind of based on uh how we feel the recovery is going um and we feel that we do have sufficient uh means to meet that test um you asked a question about the the liquidity guidance and whether or not you know that's sufficient or what that reflects is kind of the way i took it um When we provide the liquidity guidance, it includes cash and availability. So it doesn't really matter whether we pay down the revolver or not. It would be included whether it's availability in the revolver, cash on our balance sheet. We do believe it's sufficient. We've worked hard to build up that cash cushion. We have more visibility today than we did in the past. But we also are very mindful of our liquidity position today. And we'll take additional measures, if appropriate, should we need to make any kind of changes on that front. So hopefully I addressed your question. Let me know if I didn't.

No, that's great. Thank you.

Your next question comes from Ben Swinburne with Morgan Stanley.

Hi, good morning. Brian, I think that was your comment about the second half of the year. I apologize if it was somebody else's question. reaching 90% of 2019 revenue adjusted for... I just wonder if you could go back to that and just explain that again, because that was a little bit quick. And also, if you could give us a little bit of color on how you guys are thinking about the different parts of your portfolio in the context of that second half. And then I was just curious, maybe for Scott, on the programmatic side, what are your plans as you move through this year into next year in terms of building that channel out further, either technology investments and whether you're seeing advertisers really pick up even further interest in that channel, including kind of on the local side would be interesting. Thanks a lot.

Yeah, so I'll talk a little bit about the revenue guidance comment, then I'll flip it over to Scott and William to talk about what they're seeing in their various markets. But the guidance provided was really to give some comfort based on the slope of the recovery that we're seeing in our business today as to where we think the business can be at the end of the year with respect to revenue versus 2019, given what we see today and what we think will be happening over the second quarter and really the second half as we see recovery in the various parts of our business. So things could change, but given what we're seeing today, we feel a strong recovery is in sight, and by the end of the year, we could be back up to 90% of pre-COVID levels, 2019 levels, on the top line. So hopefully that gives some indication at a high level of what we're seeing today, and hopefully we'll see that recovery come to fruition. Scott, William, color on the operating units?

Yeah, the programmatic question, I'm happy to take the U.S. portion of it, and then, William, to the degree you want to talk about the European, you know, we can dive into that as well. So, first off, programmatic is coming back very nicely. It is performing well, and it is performing ahead of 2019 pretty materially. At this point, so it is, you know, a channel that we see advertisers having interest in more broadly. In terms of our plans, I think you will see us add at least one more SSP, which are sort of their supply-side platforms. They're sort of the large-scale distribution platforms that give you access to different DSPs, which are the demand-side platforms. That's what the advertisers actually use. We currently have a pretty robust mix, but we're always looking to enhance that and we're always looking to add. I think you're also going to see us building more and more capability in terms of how we're actually handling the content side of things. So there are investments that we're making in our content management system and other development that we're working with along those lines in terms of making our tool set more robust and able to continue to scale nicely. As to the question on local, we have had a few local customers buy programmatically. It has not been the primary angle on our business. But I think as you see the demand side, some of the more mainstream demand side platforms coming online that do a lot of business at that level, I think you'll see us pick up more. But that has not been the focal point so far. William, I don't know if there's anything you'd add on Europe.

No, I'd only say, I think I said right at the start of this year that programmatic was going to be a key part of our agenda right across the company. And what Scott's been doing in the U.S., I think, has been a model of growing our programmatic capabilities. As I said in the script earlier, we would have launched in five major European markets our our branded programmatic product, which is now, as I say, in those five key markets initially. We call it Clear Channel Launchpad, which connects our premium digital inventory to SSPs and to digital platforms. And it's an important start. Europe's a little bit behind the U.S. in adopting programmatic at scale products. But I'm absolutely convinced that within the next two to three years, we'll see it taking a pretty significant share of our business. So it's an important step forward. Thanks, everyone.

Your next question comes from Lance Batanza with Cowan.

Hi, guys. Thanks for taking the questions. I have one for Brian and one for William. Maybe, William, we could start with this. I found the country by country commentary in Europe very helpful. And I understand that the pace of the restrictions being lifted varies by country to country. But what about the lag between return of audience and return of ad dollars? And generally, if I'm hearing you right, it sounds like you're not really seeing a lag this time around. That feels different than last fall. But did I get that right?

It really depends, Lance, on how much digital inventory we have in each market. So in the UK, where over 60% of our revenues now comes from digital screens, the recovery is pretty much instant in terms of our revenue once restrictions are lifted. So once audiences are back on the street, advertisers want to reach them, and we can get those straight up onto digital screens. and then follow on soon after onto traditional inventory. In France, for instance, where we have significantly less digital inventory, that recovery can take a little longer. Although I would say that if we look back into Q3 of last year, when restrictions were lifted in France, we did see revenue coming back pretty fast. I mean, not as fast as we would with a stronger digital footprint, But I think that is the main variable. I think the other factor to look at is the clarity of the government's signaling of what their plans are in terms of loosening up restrictions. So I think in the UK we benefited from a very clear roadmap of five weekly stages of the opening up. In Spain, it's been much less clear what the process was going to be. And in France, I think we would say they took a long time before they reacted. They have now reacted, and we're now seeing infection rates go down, vaccination rates go up, and restrictions being lifted. So as I say, I'm very optimistic about the direction of travel. I'm optimistic about the speed of recovery once restrictions are lifted, but it does vary a little bit market by market. Does that help?

Yeah, very much so. Thank you. And then, Brian, just for you, does somebody still have $40 to $45 million of LCs outstanding? And if so, presumably that is factored into the liquidity guide. In other words, that's a net against what you would otherwise be able to borrow on the revolver. Is that right?

That's correct, and I actually think we disclose what the availability, which would be the size of the revolver less than any kind of commitments, which would include LCs. I don't remember the exact amount. It may be a little higher than $45 million, but we are a big LC user. That is backed out because it's not available for liquidity, so it would not be included in the liquidity number.

Okay. Thanks, guys.

Your next question is from Stefan Besson with Wolf Research.

Good morning. Thanks so much for the additional color today. Could you talk a bit about margins and how they should trend throughout the year and perhaps over the longer term for both America and Europe? Should we be targeting pre-pandemic levels or is something changing the cost structure to push it one way or the other?

I can take a stab at that, and then William and Scott, if you want to weigh in respectively. Look, I think margins are coming back. In America, as we talked about, sequential improvement. We're a little early in the recovery in Europe to make that commitment for Q2, but as the economies start to rebound, as Europe starts to kind of follow in and really get traction in the recovery, we would expect a margin improvement is there. I mean, this is a A large fixed-cost business has a great deal of operating leverage, and we'll see that pull through as the recovery occurs. And if it's not in Q2 for Europe, we would expect it in the second half. The other part of your question about do we ever expect margins to hit pre-COVID levels, well, the business does change over time, and I think that answer is dependent upon a number of things. We have some positives. We've taken out some costs in the business. We continue to take out costs in Europe. It'll take a little longer there. But we are being very diligent, and we don't expect all these costs to come back. On the other hand, the portfolio does change. If in the future we have more weight in transit or more weight in airports or more capital city contracts which have lower margins, that could change the overall margin profile. And we do have some of that business mix there. differential right now and so I wouldn't expect that when revenues get back to 2019 levels you should assume margins would be at the same point it's going to reflect some of the underlying changes in the business but by and large you know incremental ballers to this business will fall through and we're encouraged that we're starting to see some of that and and you know again I think through the rest of the year we hope to deliver it Scott William I don't know if he had any further color but that's that's where I'd start

Scott, do you want to make any comment for the U.S.?

I mean, I think the only thing I'd just say is that the next several quarters are going to be lumpy, and that could go in both directions. And so what's driving that is we're still in negotiations and still in approval processes on different relief programs, and we will start to see some snapbacks happen as relief that we got during the worst of the crisis. And so it's probably not going to be a neat linear path over the next couple of quarters. But I think medium to long term, you will see a healthy margin profile, you know, reemerge.

Scott, I'm glad you mentioned that. That's a very fair point. My comments on the longer term recovery was assuming all of this had unwound. I think you're right. The next few quarters, due to the lumpiness of some of the deferrals and abatements, it could be, like you said, could be very lumpy. So thank you for that.

Yeah, so I would only add, I was going to use the lumpy word as well, I'm afraid, because it applies equally to Europe. It's pretty lumpy. The other point I would make for Europe, just to echo Brian's point, is we have made it clear we are going through some pretty significant cost reduction programs in Europe and in some specific European markets. As you'll know with some of those European markets, those cost reduction programs can take time as you go through extensive negotiations. So whilst we are very actively addressing some cost-based challenges in Europe, the impact is not going to be instant. It's going to take some quarters before we really see that impacting margin.

Great. Thanks so much for the call, Eric.

Your next question comes from David Joyce with Barclays.

Thank you. I was hoping you could provide some more color on the proportion of your advertisers and revenue that are coming from radar at this point, what portion of your footprint is enabled, and also are you linking with other, to what degree are you linking with other media companies with that holistic omnichannel buy program for your advertisers? Thanks.

William, do you want me to take a run at this first? Yeah. Yeah. Sure. So in the U.S., 100% of our footprint is radar enabled. And It's very hard to actually answer your question because radar is not something that the client buys. It's a service that goes alongside what they're buying, and so a client might use radar, and many of our clients at this point are using radar to do their planning, but they might not do an attribution study. They might not sell any other media through our RadarConnect tool, and they might not embed our data. On the other hand, advertisers might, you know, do all four of our radar products here in the U.S. So we don't really measure it by what percent of our revenue goes through it. And let me speak to the omni-channel because I think there could be two ways to answer that question. I think thing one, would be that when we do radar studies, we do include analytics for all the out-of-home that's being used, not just ours. But I don't think that's necessarily what you meant by omnichannel. I think you're thinking of omnichannel DSPs. So a programmatic thought process, and you can clarify it for me when I give you this blurb as well. But omni-channel DSPs are relatively recent to out-of-home programmatic. They are absolutely a growth channel, and we are definitely seeing advertisers, including out-of-home, in their digital campaigns where they might be buying other digital advertising products along with digital out-of-home. The work... Space for these omnichannel DSPs includes QuickBoxes where they can add digital out of home alongside display ads or search or other things like that. But that is still the minority of our programmatic revenue at this point. It's something that we think has huge promise, but it's an emerging channel. So hopefully that addressed your questions.

Yeah, those comments were all just for the U.S., correct?

Yeah, that was all US-focused. If you take Europe, we launched radar in just the UK and Spain just last year. We are looking to roll out the product into other European markets later this year. But again, to Scott's point, we use it as a market indicator of audience and of the audience travel patterns. and so use it to demonstrate to our advertisers the audiences that they can reach through a collection or a network of boards or screens, but it doesn't relate to a specific advertiser campaign in general.

Okay, thanks. And a second question, if you could please clarify, when things normalize in 2022 or 2023, Will the margins be higher due to your various cost cuts, or will the revenue mix shifts differential make the margin comparisons a little bit more difficult from pre-COVID?

Yeah, I don't think we know the answer to that. I think we are achieving cost savings, and we think some of those will stay. And obviously, as the business grows, we'll have to reevaluate it. And that is tailwind. At the same time, we're made up of a portfolio of contracts, and we'll continue to go after profitable contracts, and that can shift over time. If we get into more transit, that could change the business mix. So I don't know that we know the answer. I think we'll continue to focus on improving margins the best we can, but at the end of the day, we want to generate positive and incremental positive free cash flow. and we'll manage the portfolio as we think is most accretive to schedule the value.

And if I could just understand better the renegotiated lease contracts, are those temporary abatements, temporary changes? Do they come back with prior levels of revenue? How should we think about that cadence?

Well, it's a mix. And I think you start with, you know, when COVID impact was the greatest, you started with deferring payments on everything and trigger negotiations. It's unprecedented times. Our counterparties largely realize that as well. And sometimes those deferrals turn into abatement. Sometimes there's government support behind it. Sometimes you're dealing with private landlords and it's more of a discussion and maybe it is a deferral and ultimately it will have to be paid out. But there's a wide spectrum of discussions, and these are ongoing. So I think that once we confirm that something is a permanent abatement, we disclose that, and everything else is a deferral. If it hasn't been paid, some of those deferrals could flip into abatements. Some of those will be deferred and ultimately unwind as the recovery continues. So it's a mixed bag, and we do disclose separately the site lease abatements that we've gotten in the quarter and all of last year. And so hopefully that gives you some color on the site lease negotiations. It's a big initiative. The operators have done a great job, and they'll continue to do what they can as long as the business is negatively impacted by COVID. Great.

Thank you very much.

Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. That's star one. Your next question comes from Avi Steiner with J.P. Morgan.

Thank you, and good morning, and thank you for squeezing me in. A quick few here. Domestic travel seems to be coming back based on TSA numbers. I'm curious, how important is it for the company that business travel returns versus what seems like personal? And if you could just remind us, on the lag time on the airport's business between higher levels of travel and revenue coming back to historical levels. And I've got a couple more. Thank you.

Sure. Thanks, Avi. You're absolutely right. Travel is coming back nicely. You know, the business travel is what historically the majority of airport advertising anchored on. But As we've gone through the crisis, we've actually engaged a lot of advertisers who are not sort of B2B oriented. And so we're going through a bit of a portfolio mix shift. I think the way I'd answer your question is that it will definitely be important for us to have international travel in particular start to reemerge because the international terminals tend to be some of your most premium places. inventory, whether for business or for consumer-oriented products. Business travel as a whole I don't think needs to get back to the same level that we had before COVID in order for it to be still a very robust audience and a robust opportunity. As far as the question on the lag, I think when you go back and look at last year and now that we're disclosing the information, you might see this a little bit more clearly on transit. We didn't see a precipitous fall off immediately. And it's because a lot of the airport contracts are a little bit longer term in orientation. And so you had a little bit of an unwind that happened And that works in the other direction too, that you need to get advertisers to decide that they believe that the return of the audience is robust, and then they need to commit in order to secure locations and secure their positions. We've never gone through anything like this, or at least not in recent history. I think 9-11 is probably the closest analogy, and it was pretty different in terms of the speed and how traffic rebounded and how things worked there. So we really don't know what the lag is going to be, but we expect that it will probably be multiple months. We definitely are seeing advertisers, some of the strategic advertisers that really prioritize airports come back for the second half of this year. So I think our news is going to get a lot better as the year builds, but in terms of calling the ball on exactly when we're back to run rate, I do think it will lag the roadside business by multiple months.

I appreciate that, Collar. Thank you. And then, Brian, just on the liquidity comments, which were very helpful, just for me, beyond interest in CapEx,

how do we think about working capital you know some of these deferrals come back and any other movements in there and then and then restructuring cash restructuring please yeah you know that that's one of the reasons why we we kind of went out and gave a year-end liquidity position because i do think we have some swings particularly in in the deferrals you know we've got our operators you know, working very hard to defer those payments, convert those payments to permanent abatements. And then, you know, for liquidity purposes, you know, between now and kind of normalization, we have to pick periods when they will hit. And so we thought it was important to kind of go out to the end of the year and provide some liquidity guidance. And I think we feel, you know, given what we see today, we feel pretty good about that range. You know, restructuring charges, yeah, look, I think we have a number of things going on. If I look at some of the cost savings initiatives, largely we have spent and we are benefiting from the restructuring initiatives that we've taken in the U.S., Latin America, and a significant amount of the corporate. What will take a little longer is the European side, and we've provided some data points on that. And it really is a function of, you know, the countries that we operate in. You're going through the process there. And we've actually revised the program to make it larger and more substantial. That will take a little bit longer, but I do think from a cash outflow perspective, since a lot of that cost is really severance-related, that they should be largely in line. Put another way, you won't have a huge amount go out day one and not receive that until the first quarter of 2023. They should be kind of matched funding from here on out. We have some upfront costs, but by large. But for the most part, they should kind of match going forward. So hopefully that's helpful on the working capital and restructuring side. Let me know if you have further questions.

That's great. And maybe last one I haven't heard in a while, but I may have just missed it. Any update on the Los Angeles billboard market? I thought earlier in the year there were some new rules potentially coming out there. So any comments there? And thank you for the time.

Thanks, Javier. I'll take that one. I'll take that one as well. Um, the thing you might have read about was the city planning commission, uh, had put forth their response to, um, some of the, the ordinance language that the city council had had drafted. Um, it's now back in the city council land use committee and, um, They are working on it. I would not hazard a guess as to when that political process will yield, but I do know that they're working on it. It definitely got deprioritized during COVID. We had felt pretty bullish the early part of last year that things were going to move through. And I do think that the city council is engaged and is very serious about getting an ordinance out that'll work for the industry there, but we don't. We don't have a timeline that's concrete.

Appreciate all the time. Thank you.

Thanks.

At this time, there are no additional questions. I will turn it back over to William Eccleshare for his closing remarks.

Thank you. And thank you, everybody, for joining the call and for supporting us. During this period, I mean, I just want to end by saying I think we will look back. We will look back on the second quarter of 2021 as the quarter where the business turned a corner, the pivot quarter, if you like, where we went back into growth and we are starting to see the real recovery from COVID-19. It's clearly dependent upon some factors out of our control as whether there are kind of further further COVID variants and how vaccine programs run out in different markets around the world. But all of the signs that we are seeing are truly encouraging around our businesses' ability to bounce back from COVID. And just picking up on some of the questions that we've had today, as those restrictions are lifted and as audiences come back into the streets, we do see that recovery coming. The lag varies market by market, depending a bit on levels of digital inventory and a bit on specific circumstances. But as I say, Q2 is the key quarter for us as we turn that corner and look to the second half of the year to really demonstrate the business back into full growth. So thank you for your support. Thanks for the great questions. and we look forward to talking in the coming weeks and months. Thanks very much.

Thank you. This concludes today's conference call. You may now disconnect.