Clear Channel Outdoor Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Clear Channel Outdoor Holdings, Inc. 2021, fourth quarter and full year earnings conference call. My name is Seb and I'll be the operator for your call today. There will be an opportunity to ask questions on the call. You can register your question by pressing star one on your telephone keypad or press star two if you wish to withdraw your question. I will 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 2021 Fourth Quarter and Full Year Earnings Call. On the call today are Scott Wells, Chief Executive Officer of Clear Channel Outdoor Holdings, Inc., and Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings, Inc., who will provide an overview of the 2021 Fourth Quarter and Full Year 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 the line for questions and Justin Cochran, Chief Executive Officer of Clear Channel Europe, 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 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 release and the earnings conference call presentation. which can be found in the financial section of our website, investor.clearchannel.com. Please note that the earnings release and earnings conference call presentation that are available on our website are integral to our earnings conference call. They provide a detailed breakdown of foreign exchange, segment revenue, adjusted EBITDA, and adjusted corporate expenses, including the impact of share-based compensation and restructuring charges, among other important information. For that reason, we ask that you view each slide as Scott and Brian comments on them. Also, please note that the information provided on this call speaks only to management's views as of today, February 24th, 2022, and may no longer be accurate at the time of a replay. With that, please turn to page four in the presentation, and I will now turn the call over to Scott Wells.

Good morning, everyone, and thank you for taking time to join today's call. It's great to address all of you for the first time since I assumed the role of CEO of Clear Channel Outdoor at the beginning of this year. The transition with William has gone smoothly and I'd like to extend my thanks to him for his past leadership as well as for his ongoing strategic contributions in his new role as Executive Vice Chairman. With the support of our talented and dedicated team, we are making this leadership transition from a position of strength as we continue to transform the world's oldest advertising medium into a technology-fueled visual media powerhouse. I'm pleased to report strong results for the fourth quarter of 2021, particularly given the challenges we faced earlier in the year. On a reported basis, consolidated revenue increased 37 percent compared to 2020. Our revenue also soundly surpassed our revenue for the fourth quarter of 2019, excluding China and movements in foreign exchange. Brian will provide an in-depth review of our results following my remarks. I'm especially proud of how our organization responded to the severe COVID-related headwinds we faced in the past year. The entire CCO team has my sincere thanks for rising above the myriad challenges we faced to deliver these results. Throughout the pandemic, we kept our eye on the ball and doubled down on our strategic plan. As a result, we strengthened our presence in the advertising community during this period. And as our markets reopened, we saw consistent improvement with each passing quarter. culminating in our very strong fourth quarter performance. We've developed a dynamic, smart, addressable platform that we believe will grow and strengthen over time, allowing us to serve advertisers in ways that we could only imagine a few short years ago. We are meeting advertisers where they need us most and demonstrating our ability to accurately reach their target audiences, even as consumers alter their mobility and purchasing patterns. The outdoor industry overall has returned to growth, and we believe we can grow revenue in excess of real GDP and traditional media as a result of our business transformation efforts. The resilience our business has demonstrated throughout the pandemic is certainly a strong and tangible data point. This resilience is further supported by the macro environment where advertisers are being overexposed to digital and challenged by non-sports linear TV. Our continuing push to add intelligence, addressability, and attribution will serve to strengthen Adafone's role as the last mass visual medium. Our ability to drive cash conversion rounds out the reasons we're excited for the future. As you can see in our 2021 results, incremental revenue leads to strong cash conversion, particularly in our America's business, and we believe we have a powerful engine for cash generation as we drive revenue growth while continuing to operate efficiently. Looking ahead, We believe our long-term outlook remains very positive, and we remain committed to our strategic roadmap, which includes accelerating our digital transformation, improving customer centricity, and driving executional excellence. Today, I'll unpack our three primary digital transformation initiatives. First, we have continued to grow our digital footprint, which is central to our long-term growth strategy. From perspective, digital led the rebound in 2021 and was up 66% in the fourth quarter and up 41% for the full year. In the US, we deployed 94 larger format digital billboards, giving us a total of more than 1,500 digital billboards in 2021. Combined with our smaller format digital displays in airports and on shelters, we have a total of more than 4,000 digital displays across the United States. And in Europe, we added 1,361 digital displays in 2021 for a total of over 17,500 digital displays now live. In the year ahead, we are aiming to deploy a similar number of digital billboards in the US and digital displays in Europe, which will further expand the addressability of our portfolio. And we are investing in the team and infrastructure to accelerate that process. Second, we have continued to up-level our radar offering through a range of partnerships that have further elevated our analytics capabilities and our ability to measure the impact of our assets. Radar is now well established in the U.S., and in the past year we introduced Radar for audience proximity planning in our major European markets. We believe this has been a contributor to the rebound of our business. Radar offers advertisers an easier way to unlock the value of out-of-home advertising by applying approaches and strategies traditionally applied in the online world to the physical world's largest screens. Our ability to deliver a valuable set of actionable insights to advertisers is enabling our sales team to focus more on selling creative ideas that effectively reach the demographics that advertisers want to reach. Over time, we expect to continue to attract new advertisers and broaden our discussions with our customers beyond the locations of our outdoor assets to include, as well, the value of specific audiences and consumer behaviors. We are demonstrating our ability to influence purchasing decisions even as consumer mobility patterns change. This is a key outcome driven by the investments we've made in our platform. And third, we're continuing to build on our programmatic presence. Through our integration with multiple DSPs and SSPs, our digital out-of-home platform is increasingly accessible to digital advertising buyers through the same buy-side platforms they utilize to spend their digital budgets. This was an example of our digital transformation and customer centricity pillars working in tandem, using technology and partnerships to open our assets to new buyers and budgets. While it's still a small component of our results, revenue from programmatic increased substantially in the past year, and we expect it will continue to advance in the year ahead. Our expectation is based on the strong evidence that advertisers value the programmatic option from their behavior with digital display, video, and most recently, CTV. I'll address our other strategic pillars, customer centricity and executional excellence, in future calls. But if you refer to slide five, you can see a few examples of successful campaigns driven by all three of our strategic pillars. In summary, as we continue to execute on our initiatives, we believe we will strengthen our ability to attract more advertisers to our platform and gain share from other media as we drive growth in the out-of-home medium. At the same time, we remain focused on further demonstrating the operating leverage in our model through profitable growth, while pursuing accretive opportunities and strengthening our balance sheet. Finally, as we announced in December, we've also commenced the process of evaluating strategic alternatives for our European business as part of our focus on optimizing our portfolio. Europe performed very well in the second half of 2021 and is positioned well for our strategic review, including a possible sale. With that, let me turn it over to Brian to discuss our financial results as well as our guidance.

Thank you, Scott. Good morning, everyone, and thank you for joining our call. As Scott mentioned, the past year has been exceptional. We moved from a very difficult first quarter to a fourth quarter with revenue and segment-adjusted EBITDA for Americas and Europe ahead of the fourth quarter of 2020 and 2019. Moving on to results on slide six. Before discussing our results, I want to remind everyone that during our GAAP results discussion, I'll also talk about our results excluding movements in foreign exchange, a non-GAAP measure. We believe this provides greater comparability when evaluating our performance. To avoid repetition, the amounts I refer to are fourth quarter 2021, and the percent changes are fourth quarter 2021 compared to fourth quarter 2020, unless otherwise noted. Consolidated revenue was $743 million. a 37.2% increase. Excluding movements in foreign exchange, revenue was 38.8% and more importantly, 4.9% compared to the fourth quarter of 2019, excluding China and excluding movements in foreign exchange. Consolidated net income was 66 million compared to a net loss of 33 million in the prior year. Consolidated adjusted EBITDA was 222 million up substantially compared to $101 billion in the fourth quarter of 2020. Excluding movements in foreign exchange, consolidated adjusted EBITDA was slightly higher at $223 million. For the full year, consolidated revenue increased 20.8% to $2.2 billion. Excluding movements in foreign exchange, consolidated revenue for 2021 increased 19% as compared to 2020. Consolidated net loss for the full year was $433 million compared to $600 million in 2020. Consolidated adjusted EBITDA for 2021 was $423 million, up substantially compared to $120 million in 2020, excluding movements in foreign exchange, adjusted EBITDA was $431 million for the full year. Now, please turn to slide seven for a review of America's four-quarter results. The America's revenue was $371 million, 44%, and even more significant, it was 7.6% higher than the $345 million revenue we delivered in Q4 2019. Revenue was up across all products, most notably airport digital displays, digital billboards, and print billboards. Digital revenue, which accounted for 41% of America's revenue, was up 83.7% to $153 million today. Driven by both airports and billboards, the rebound in digital is in large part due to the flexibility and ease of buying digital, as well as the new airport inventory in New York and New Jersey, and programmatic. Advertisers want the ability to place ads closer to the date of campaign and easily change the content. National was up 48.6% at recurring pre-pandemic levels, accounting for 39% of revenue, with local up 41.1% and accounting for 61% of revenue. Direct operating and SG&A expenses were up 21.6%. The increase is due in part to an 18.2% increase in site lease expense to $112 million, driven by higher revenue and higher compensation costs due to improved operating performance. Segment adjusted EBITDA was $170 million, up 80.3%, with segment adjusted EBITDA margin of approximately 45.8%. The adjusted EBITDA margin was higher due to a few one-time expense benefits related to COVID. Excluding these one-time benefits, segment-adjusted EBITDA margin would be close to Q4 2019's margin of 42.3%. Turning to slide eight. This slide breaks out our America's revenue to billboard and other and transit. Billboard and other, which primarily includes revenues from bulletins, posters, street furniture displays, spectaculars, and wall scapes, was up 26.7% to $294 million. This performance was driven by improvements across all our regions with particular strength in the Northeast. Transit was up 200.9%, with airport display revenue up 214.9% to $73 million. Airport revenue was helped by the rebound in airline passenger traffic and the new Port Authority of New York and New Jersey advertising sponsorship contract. Now on to slide 9 for a bit more detail on billboard and other. Digital revenue rebounded strongly in Q4 and was up 45.3% to $107 million and now accounts for 36.4% of total billboard and other revenue. Non-digital revenue was up 18.1%. Next, please turn to slide 10 and a review of our performance in Europe in the fourth quarter. My commentary is on results that have been adjusted to exclude movements in foreign exchange. Europe revenue increased 33.1%, driven by improvements across all products, most notably street furniture, and in most countries led by France. Digital accounted for 39% of total revenue and was up 52.4%. In addition, the strength of our digital footprint drove growth in overall revenue in a number of markets in the quarter compared to 2019, including the UK, Belgium, Sweden, Finland, and Ireland. Direct operating and SG&A expenses were up 15.6%. The increase was driven primarily by increased site lease expense, which was up 36.1%, driven by lower negotiated renovations and higher revenue. Additionally, compensation was higher due to improved operating performance. These were slightly offset by declining costs for the restructuring plan to reduce headcount. Segment adjusted EBITDA was $86 million, up 131.8%. This was driven by higher revenue in the period with segment-adjusted EBITDA margins of approximately 24%, substantially above the fourth quarter in 2020 due to high pull-through as a result of a relatively fixed cost base, benefits from cost reductions, and one-time savings. Moving on to CCIVD. Our Europe segment consists of the businesses operated by CCIVD and its consolidated subsidiaries. Accordingly, the revenue for our Europe segment same as the revenue for CCIDV. Europe's segment-adjusted EBITDA, the segment profitability metric reported in our financial statements, does not include an allocation of CCIDV's corporate expenses that are deducted from CCIDV's operating income and adjusted EBITDA. As discussed above, Europe and CCIDV revenue increased $81 million during the fourth quarter of 2021 compared to the same period of 2020 at $350 million. After excluding $8 million from impact For movements in foreign exchange rates, Europe and CCIDB revenue increased $89 million in the fourth quarter of 2021 compared to the same period of 2020. CCIDB operating income was $51 million in the fourth quarter of 2021 compared to operating income of $1 million in the same period of 2020. Let's move to slide 11 and a quick review of other, which consists of our Latin American operations. Other revenue is $22 million, about $7 million. Excluding movements in FX, revenue was up 50.9%, driven by improvements in all countries. Direct operating expense of SG&A, for $18 million, up $3 million. And segment-adjusted EBITDA was $4 million, up $3 million. Now moving to slide 12 and our review of capital expenditures. CapEx totaled $66 million in the first quarter, an increase of $35 million compared to the prior year period, as we ramped up our spending, particularly on digital. For the full year, CapEx was $148 million, up $24 million compared to full year 2020. The increased CapEx for the full year was also largely due to our investments in digital. In addition to our capital expenditures, I also wanted to highlight that during 2021, we made several asset acquisitions totaling $20 million, primarily related to permits and easements in our America segment. Now on slide 13. Third Channel Outdoors consolidated cash and cash equivalents totaled $411 million as of December 31st, 2021. Our debt was $5.6 billion, up slightly from the prior year. As we previously announced, in the first half of the year, we refinanced our nine-and-a-quarter senior notes, and one of our non-guarantor European subsidiaries entered into an unsecured loan of approximately $34 million through a state guarantee loan program. Also, in the fourth quarter, we repaid $130 million outstanding balance under the revolving credit facility. Cash paid for interest on the debt was $122 million during the fourth quarter and $388 million during the year ended December 31, 2021. The fourth quarter cash paid for interest was up approximately $100 million compared to the prior year, primarily due to the timing of interest payments. Our weighted average cost of debt improved from 6.1% as of December 31st, 2020 to 5.6% as of December 31st, 2021. Moving on to slide 14 and our outlook for the business. At this point in time, we believe our consolidated revenue will be between $520 million and $550 million in Q1 of 2022, excluding movements in foreign exchange rates. America's revenue It's expected to be between $290 million and $300 million, in line with Q1 of 2020, which, as you may recall, was a really strong quarter, up 8.5% over Q1 of 2019. And Europe's revenue is expected to be between $220 million and $235 million, excluding movements in foreign exchange rates. We expect consolidated capital expenditures to be in the $190 to $210 million range in 2022. Consistent with our plan to accelerate digital transformation, we anticipate around 60% of this amount will be spent on digital assets across our portfolio. Additionally, we anticipate having approximately $324 million of cash interest payment obligations in 2022. And now, let me turn the call back to Scott for his closing remarks.

Thanks, Brian. In summary, we have entered 2022 in a strong position to continue executing on our plan. As I noted, we're not just picking up where we left off prior to the pandemic. Rather, we believe we can improve our performance as we leverage the investments we are making in our platform to fuel our digital transformation and expand the universe of advertising we can serve. Further, as we continue to invest in technology, we remain committed to carefully managing our costs and further demonstrating our operating leverage through profitable growth while evaluating strategic options for our European assets and strengthening our balance sheet. And now, let me turn the call over to the operator for the Q&A session. And Justin Cochran, our CEO for Europe, will join us on this call.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad now. If you change your mind and wish to withdraw your question, please press star 2. The first question today comes from Cameron McVeigh from Morgan Stanley. Please go ahead.

Hey, thanks for taking my questions. I had two. First, could you give some more color on the verticals that have yet to recover? And second, could you provide any update on the European Strategic M&A? Thanks.

Thanks, Cameron. I'll take the second one first because we figured we would get this question. We actually have a little bit of a prepared remark for it. We announced in December of 2021 that we had commenced the process of evaluating strategic alternatives for Europe, including possible sale. And that's part of our portfolio optimization process. We know that there's lots of curiosity about this. But we're really not in any position that we're going to be able to comment on it. And so we really just need to refer you back to that and just assure you that as soon as our board takes action on it, we'll be communicating that very promptly at that time. So that's Europe. On verticals, there really are not lagging verticals at this point. Over the course of Q4, we saw most of the big verticals that had been lagging, things like amusements and theatrical and retail to a degree. you know, really get back to a healthy level of spend. I think we're now in a much more normal vertical environment where as, you know, things ebb and flow in the different verticals as, you know, new competitors come into spaces, as people launch products, advertising is taking place. It's not an environment right now that, you know, has any prominent laggards.

Good to hear. Thanks.

Our next question comes from Stephen Cahal from Wells Fargo. Please go ahead.

Thanks. Maybe just first on the first quarter guidance. I think over the last few years when you have guided, you've generally been on the conservative side. Certainly it looked like Q4 was, even with the update you gave in December. So just curious how we should think about the Q1 guide in light of that trend. Do you feel like you're being conservative? Is the market changing? you know, moving pretty quick, so it's just a little tough to call. So any color on there would be helpful. And then relatedly, could you remind us of the operating leverage, maybe the percentage of costs that are fixed in each Americas in Europe? That'll just kind of help us think about maybe what the EBITDA implications are for the Q1 guide. And then, Scott, sorry if I missed this, but, you know, with what you're seeing on CapEx and cash interest, Do you think you'll be free cash flow positive this year? Any comment on free cash flow would be helpful. Thank you.

All right, Steve. A lot there, and I hope I can cover it, but if I don't, we can certainly circle back. And I didn't write these down as I was going along. So Q1 guidance, being conservative. Yeah, I was going to take that one last, but since Scott brought it up. Look, I think it's natural for us to be conservative, and I'd rather be that than the other. That being said, I think our guidance typically at the time we give it is the best estimate of what we see going forward. And I think that's the case for Q1. Certainly both segments, but particularly Europe, felt some softness with the Omicron variant during the quarter. We think we're on the other side of that, and I think the numbers reflect where we think we're coming out. And, you know, on a consolidated basis, aren't all that different from what we're seeing. You know, what we saw in Q1 of 2019, maybe America's a little stronger being less impacted, Europe a little weaker being more impacted by the variant. But I think we feel pretty good about the guidance. Again, it's the best that we have. at the time we provide it. Operating leverage. We do have a significant amount of costs that are fixed. Our single largest expense is rent expense, and in both the Americas and the European segment, a majority of those expenses are fixed. I don't know that we've provided a whole lot more detail per segment on kind of what the fixed and variable is. But I think it's roughly 75% fixed, 25% variable, but it shifts around those numbers periodically. Our second largest expense is comp expense. And then I think it drops off pretty dramatically after that. So hopefully that gives you some directional guidance on our operating costs and the fixed and variable components therein. And then the third piece was free cash flow guidance, if I recall. And, you know, we're not providing annualized free cash flow guidance, but, you know, I think it's a good proxy to take a look at our performance in Q3, Q4, and our guide for Q1 as that being kind of, I'm going to knock on wood, but say, you know, post-COVID recovery period. You know, the business is back on its footing. It's still recovering. But if you kind of analyze the performance, backed out the one-timers, the rent abatements, the kind of the credit write-off reversals, different things, and then you adjust it on the other side for the COVID impact in Q1, I think you're getting to a baseline that's looking pretty predictive and pretty representative of 2019 levels. And we hope to progress from there. So not exactly answering the question, but hopefully give you some color around the way we're thinking about the business. Scott, I don't know if you have anything to add on top. No, I think I covered it.

Thanks, Steve.

Thank you.

Our next question is from Lance Vitanza from Cowan. Please go ahead.

Hey, good morning. This is John. I'm in for Lance. Congrats on the quarter. So I understand the Air Force generated about $73 million during the quarter. Just wondering how much of that came from the New York, New Jersey PA contract?

Hey, Jonathan. So I think as we've said, we don't typically comment on individual contracts, but I know the spirit of your question is kind of different. How widespread is the recovery in airports? And I think I can characterize that comfortably as it is widespread. We are seeing good, strong recovery. The patterns that we've referenced in past quarters of the most heavy international airports being somewhat the slowest to come back have held up, but not terribly so. The airports did essentially triple year over year in Q4, and that was broad-based. That was not any one contract causing that.

Okay. Just two more questions for me. The first one, the guidance for the first quarter, you know, 520 to 550, how does that compare to the first quarter of 19, excluding China?

I think it's in the same zip code, maybe a little softer on a consolidated basis. It's driven by stronger performance anticipated in the U.S. in Q1 and a little weaker performance in Europe, again, a little more impacted by the Omicron variants, which sprung up early in Q1. But again, I think we're on the other side of that, and I think we'll have a relatively comparable Q1 based on our guidance versus what we saw in 2019. Next, China.

Got it. And lastly for me, what percent of the current debt is fixed rate versus floating? And of the 324 cash interest expense guide, how much is that related to interest rate hedging?

So we try to maintain about a third, two-thirds floating fixed. Again, I think having a large amount of prepayable bank debt in the current environment is a good thing. And we've certainly benefited from low interest rates, although also recognize that we are in a rising interest rate environment, but also recognizing that our business, at least historically, has performed relatively well in those type of environments. With respect to hedging, you know, upon separation, or the 12 months after separation, we basically recapitalized the company, and so we were able to naturally establish our fixed floating mix, so we don't have any interest rate hedges on the books at this time. Does that answer your question, Jonathan?

Yeah, it does. Thank you so much, and congrats again.

Great. Thank you very much. Our next question is from Abby Steiner from J.P. Morgan. Please go ahead.

Thank you, and good morning. A couple questions here. Maybe, Scott, if I could start in terms of one of the strategic initiatives priorities you talked about. You talked about programmatic and some of the initiatives there, but can you size the opportunity and maybe – what the timing may be to get to what you think the TEM ultimately is?

The opportunity on programmatic is substantial. If you look at the digital space really across all the different kinds of digital advertising programmatic accounts for more than three quarters of the revenue in that space. In our space, it's still single digits. I think as the marketers embrace it, you have potential for some substantial growth. On the flip side, there are substantial parts of our assets that people buy for different and or aren't able to be converted. It's not a one-to-one. I'm talking about the printed type assets. A lot of the iconic type assets, people might not actually buy programmatically because they're really trying to own a location, if you will. I think we are in the very early innings of it. It's growing very, very fast. Marketers have definitely shown that they like the experience of being able to buy flexibly with data. So I'm very bullish that this is a good opportunity for our space.

Great. Appreciate that. And then if I could flip it to the expense side, you know, inflation is obviously impacting a number of sectors. and outdoor seem to be a little more insulated. And I think, Brian, you talked about the fixed variable cost at $75.25. But maybe talk about inflationary pressures, if any, that you're seeing.

Inflationary pressures. Yeah. I think the key thing is we do have a relatively high percentage of fixed leases. That's our single biggest expense category. And so that does provide some insulation. In certain contracts, in Europe in particular, you might have some escalators. But I think by and large, that is one of the advantages that we have vis-a-vis others in an inflationary environment. Our second largest cost category, comp, is something we have to keep an eye on, and we have. So look, I think that... History, if it's a good indicator, would indicate that the outdoor industry and ourselves have reacted pretty well in inflationary times. We hope that is the case going forward, but we want to be idle and we want to make sure that we position ourselves as best as possible and have done so, particularly on the compensation side.

Okay, perfect. And then lastly... I know you can't comment much, but it is the first call since you've announced the strategic review for Europe. So I'm going to throw two questions out there to think and answer. Great. If not, at least I tried. But one, I don't know if you can help us think about the tax base at all for those assets. And then secondly, as it relates to Europe, is there a way to size what percentage or otherwise think about of the $127 million of kind of adjusted corporate assets may be tied to that region, and thank you all for taking the questions.

I think those are two for you, Brian. Yeah. You're creative and you're angling in for European information, so well done.

Yeah, so first I'll refer back to the statement that Scott made. There isn't a whole lot that we want to talk about with respect to Europe if anything happens. with respect to something that the board decides, if they ever decide, if there is a decision to be made, then we'll report at that time. And just, I guess I'll conclude with, it would be speculative to talk about tax bases on a hypothetical disposition, because you don't know what it looks like. I would just state that we have a tax department, they are experienced in international activity and we obviously understand the importance of minimizing tax leakage, if any, and maximizing net proceeds from any potential sale. So I think we'd be on top of that. And then haven't really talked about the division of corporate expenses. I think we report on a consolidated basis. I think in the past we have said that you know, roughly proportional to revenue percentage. We have taken out some costs in Europe, so it might be a little less than that. But I think that's the only guidance we've given historically, so we would not want to expand upon that. But hopefully that's better than nothing, Avi.

I'll take it. Thank you, everyone.

Thanks, Avi. Our next question is from David Joyce from Barclays. Please go ahead.

Thank you. If you could just provide some more color on the digital business. You added a lot of digital faces in Europe, but your digital revenue wasn't up as strongly as it was in the U.S., relatively speaking. So is it more of a factor of you have more digital assets in place in the U.S. and you were able to drive the revenue growth already, or is it that U.S. marketers are allocating more to the digital outdoor space? Thank you.

Thanks, David. I'll give you the answer on this one, and it's a couple factors, but the biggest factor is actually the size of the signs and the kind of impact of the signs. When we talk about the large format billboards, it's really not a fair comparison to look at one of those relative to one screen because the majority of what we're deploying in Europe would be a bus shelter sized screen. So maybe one of our big roadside billboards you know, is like six or seven equivalent in terms of the size and impact of it and also therefore the money. I mean, you can kind of see it in the U.S. relationship where you see how much more revenue we report on the billboards digitally than we do on the, you know, transit assets where we have, you know, multiple of the screens and the transit assets relative to the billboards. So that's the biggest single factor. I think the other things that you're talking about, in terms of US advertisers being further along the digital path or marketers being willing to allocate more spend. It's really country specific. You've heard us talk about before the fact that our UK business is 70% digital, which is our biggest proportion of digital anywhere in the world and roughly twice the proportion of digital in the U.S. So the U.S. marketers and market are certainly not ahead of the U.K. in that regard. But some of the other markets in Europe are slower to evolve. And you're right, the installed base effect, we have had the digital presence and digital playbook somewhat longer, you know, here in the U.S. So all those things contribute, but the big underlying one is just the raw value of those really big signs that comes into play. Hopefully that answers your question.

I appreciate it. Thank you.

Thanks, David. Our next question is from Jim Goss at Barrington Research. Please go ahead.

All right. Thank you. With the discussion you've had about the 75-25 fixed variable expense, obviously there is somewhat limited flexibility in cutting back on costs, but you did have improved margins both in the domestic and European operations. So I was wondering if you could talk a little about what some of the key cost and expense categories were that contributed to sort of lagging the expense growth with the revenue growth you've been able to achieve? And how much of that is sustainable? Because I guess the concept with some of the COVID issue where you might be able to rebound the revenues and maybe have some longer-term savings on the expense side and improve the profitability. So maybe discuss that a little bit.

You want me to take a first pass at this? We can, yeah, either way. Yeah, thanks, Jim. I mean, I think it's a little bit of a different story across the portfolio. And things that we've been talking about in these questions definitely come into play. First, I think as you anticipate, and as we've mentioned on prior calls, our expenses during and through the early recovery from COVID are lumpy. The relief that we got did not come in a linear way. It didn't come in a timely way necessarily, but come it did. And so we had some pretty strong relief during Q4. I'll let Brian talk a little bit some of the other factors that came in on Q4, but particularly in the US we had very strong relief. I think when you look at the European business you had very strong operating leverage to the point we were talking about as well. There was some relief in there as well, but you really had in Europe the business firing on all cylinders from a revenue perspective and if you just look at the pattern in our margins in Europe you see that Q4 is normally the kind of high point And I think, you know, Q4 of 21 was a particularly strong example of that because of pent-up demand. But let me hand it to Brian to add other, because there were other contributors.

I agree with a lot of everything Scott said. I mean, in Europe you do have kind of the seasonality component, but I think the Q4 really shows the recovery and the operating leverage in the business. And I think across the board, but particularly in the U.S., You saw that lumpiness in the fourth quarter. It reflected renovations that's prevalent in both the US and across Europe. You had the reversal of some credit loss reserves to hang over from kind of the COVID days. And then you had some temporary cost savings initiatives that were starting to wind up. And so you had those kind of three buckets of activity which supported margins. If you were to remove those buckets of activity that are kind of temporary in nature or non-recurring, you'd have margins that are very close to 2019 levels. And so I do think the relationship between revenue and margins, when you adjust for those one-timers, so to speak, does hold. It's just, you know, each quarter of last year was lumpy on when these abatements came through. And while we continue to work as hard as possible and the teams have done a great job over the past year and a year and a half to get those abatements, they will start to wind down and that lumpiness will be less going forward. And I think you really have the revenue margin relationship that you'll have going back to 2019 with some headwinds and some tailwinds. Doesn't mean 2019 revenue will automatically lead to 2019 margins. Business mix has changed. Some of Cost takeouts are tailwinds, but by and large, that general relationship should come back to a state of normalcy.

Okay. The other question area I wanted to discuss involved maybe a theme you put at the beginning of your slideshow, transforming the world's oldest advertising medium into a tech-field visual media powerhouse. That's been a theme for a number of years with the digital transformation, but also with radar. And I think there were some comments in one of the slides about radar linked to millennials, how you might be able to take advantage of maybe some of the cell phone information to adjust the display. And I wondered if you could discuss a little of how that sort of thing might work and how how it might impact, say, airport displays where you might know what a flight is, what the demographics are on a flight, and whether you would take programmatic advertising or other types of advertising and specifically adjust those display ads to match up with the market you're serving and get more sophisticated in that way.

Sure. So a lot in that question, Jim, and I guess the thing I'd start with is that marketers are not yet ready in a kind of creative availability and in terms of a, you know, spending ability to, like, be adjusting the signs in real time. And our infrastructure and, frankly, the the cell phone data infrastructure doesn't support. So we are not in the minority report world and hopefully we won't actually get to that world because that's a pretty scary world on a lot of dimensions. But what we are able to do is we're able to look at data over time and we're able to do a variety of things using radar. And so advertisers use it for planning. And the kind of thing you're talking about, let's say that they want to be at South by Southwest and we have the Austin Airport, they might actually do pretty aggressive things to get there, including in real life presence. put a car on the floor, do things with the signage in support of that. And that's something that we don't frankly need radar for. But where we do need radar is when we have an advertiser that let's say they're trying to find coffee enthusiasts and that's a demographic that we're able to access data on pretty readily. We're able to line up people to our signs whether in airports or roadside, that over-index to coffee enthusiasts and can shape the campaigns accordingly. The other things that we're able to do with radar, so that's the planning part of it. The other things we're able to do is we're able to go back and look at the behavior of exposed audiences. Again, tying it back through the cell phone data infrastructure, we're able to go back and look at did people go to retail sites We're able to connect into other data sources. A lot of advertisers have done a lot to build their first party data. We can tap into their loyalty programs and through privacy compliant ways connect back and look at did you move the needle with your audience on your campaign. That's the attribution piece of it and the extreme version of that is we'll actually integrate our data with their first party data again in a privacy compliant way using a live ramp or similar service where they'll actually then do the analysis. One of the examples that we had, we did just that with Twitch where Twitch used the data on exposure that we provide to Radar to go back and assess the impact of the campaign. That's in the presentation. When we talk about digital transformation, the sign is just the first piece of it. It's the sign, the data, the buying experience, the fulfillment. All of that is being digitally transformed, and it's a big driver for this business in the coming years.

Okay. Well, thanks very much. I think that's very helpful.

Thanks, Jim. Thank you, Jim. Our next question is from Aaron Watts at Deutsche Bank. Please go ahead.

Hey, everyone. Thanks for having me on. A couple questions. Scott, can you talk about how yield is recovering relative to pre-pandemic here in the U.S. and overall, and if there's any notable themes and differences between digital and non-digital on that front, if you could highlight those as well.

Thanks, Aaron. Yeah, I mean, a couple things. You know, first of all, I'd say that yields are coming back really, really well and are probably generally ahead of where we were pre-pandemic. And that, you know, will vary somewhat by geography and asset type. But in aggregate, yield has come back well and advertisers are valuing our media quite expensively. And as you've heard us comment before and our competitors comment on as well, our CPMs are very reasonable compared to a lot of other media and that supports a value-based discussion on what we're delivering and so yields have come back nicely. In terms of digital versus non-digital, we do perm out a substantial part of our printed inventory and so your yield conversation on that is a much less dynamic conversation because you're putting deals in place for six months, 12 months, multiple years, and those might have fixed escalators built in. It just doesn't tend to be a very dynamic pricing environment. Contrast that with digital where people are coming in and out of the market quickly, and in programmatic, the most extreme version of that you see people coming in and actually bidding competitively for the space and so that tends to be where your aggregate yields end up the highest. But digital overall is a premium product and then programmatic is a premium product within digital and so that's a big underlying factor in And it is that way because of the value that it delivers for the advertiser. It's not anything other than that that drives it. So as we become more digital, as we add more data and more insight to our campaigns, we would expect that yields will continue to improve.

Okay. That's helpful. Thank you. And Brian, I think I heard you say that the northeast part of the country was particularly strong for you. Any other call you can give on just big market relative to some of your markets and how the recovery is taking shape here of late?

Yeah, actually, I'll turn that over to Scott. He's probably closer to the operating performance in the Americas.

Yeah, I mean, the country as a whole has done well. When you look at it through a kind of percent growth perspective, you have the dynamic of COVID that came into play. And so, you know, we had a bunch of markets that didn't get crushed by COVID that badly, particularly our small markets. And those are mostly in the South and West. Those markets, you know, on a percentage basis are not growing that much, but they're not growing as fast, but they're ahead of 2019. And for the most part have been ahead of 2019, you know, throughout, throughout COVID, whereas we have some of the big cities where we took really big hits, or the airports business where we took a big hit in the aggregate, that we really saw a recovery in the second half of last year pretty universally. So there's not really a big story other than the places that were hit the hardest are recovering the fastest, But if you look at it, if you normalize it relative to 2019, things are coming back roughly in line with where we entered into COVID. And again, many of the markets are ahead of where we were in 2019. Hopefully that gives you a feel for it. I don't know, Brian, if there's anything you'd add. All right.

No, that's great, Scott. And last one for me, more of a housekeeping question, I think pointed towards Brian. Helpful on the cap tax and interest guidance for this year, anything on the cash tax side we should be thinking about for this year, or will it be relatively consistent with what we've been seeing?

I would expect it to be relatively consistent. I think the company's decision to make the election that we did minimizes our U.S. taxes, really eliminates Fed taxes in the U.S., at least on the current construct. And so what we've had in the past is some state and local in the U.S. and our international taxes, and I think that will be relatively consistent. I mean, as we have recovery, as we generate more income, it could elevate a little bit, but I think largely it will be consistent you know, with historical levels. Wouldn't expect any major changes over the next year.

And I guess relatedly, anything you can share on the size of any NOLs you've built up over the past kind of 18 months, two years?

Nothing beyond what we disclosed in the 10-K. So I don't think there's anything new or dramatic.

Okay. All right. Thanks so much for the time.

You bet, Aaron. Thank you.

As a reminder, for any further questions, please press star 1 on your telephone keypad.

All right. It sounds like we are out of questions. We very much appreciate the questions and the engagement and everybody taking time to join with us. I just leave it on the note that we are very enthusiastic about this business. We think we are very well positioned to be successful and to drive some significant growth, and thank you for your time and attention. Have a great day. Thank you.

This concludes today's conference call. Thank you all very much for joining. You may now disconnect your lines.