Clear Channel Outdoor Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Clear Channel Outdoor Holdings Inc. 2022 third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star two. And for operator assistance at any time, press the star zero key. Thank you. I would now like to turn the conference call over to your host, Eileen McLaughlin, Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining our call. On the call today are Scott Wells, our CEO, and Brian Coleman, our CFO. Scott and Brian will provide an overview of the 2022 their quarter operating performance of Clear Channel Outdoor Holdings Inc. and Clear Channel International BV. We recommend you download the earnings conference call investor presentation located in the financial section in our investor website and review the presentation during this call. After an introduction and a review of our results, we'll open the line for questions and Justin Cochran, CEO of Clear Channel Europe, will participate in the Q&A portion of the call. Before we begin, I'd like to remind everyone that during this call, we may make forward-looking statements regarding the company, including statements about its future financial performance and its strategic goals. All forward-looking statements involve risks and uncertainties, and 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 our filings with the SEC. During today's call, we will also refer to the certain performance measures that do not conform to generally accepted accounting principles. We provide 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 investor presentation. Also, please note that the information provided on this call speaks only to management's views as of today, November 8, 2022, and may no longer be accurate at the time of a replay. Please turn to slide four in the investor presentation, and I will now turn the call over to Scott Wells.

Good morning, everyone, and thank you for taking the time to join today's call. Our strong third quarter results were at the high end of consolidated revenue guidance we provided on our last call and reflect the resiliency of our platform, the dedication of our company-wide teams, and the continued execution of our strategic plan as we detailed during our investor day in September. We delivered consolidated revenue of $603 million in the third quarter, up 8%, excluding movements in foreign exchange rates. Continuing the trends we saw in the first half of the year, Our performance was supported by broad-based demand from advertisers, with notable strength across our digital footprint in the Americas and Europe. We're progressing in giving our advertisers the kind of experience they expect from digital media, which we believe contributes to our growth now and in the future. We're making our solutions faster to launch, easier to buy, and more data-driven. In turn, we believe we're performing very well during a difficult period for many ad delivery platforms. As we noted during our investor day, we believe digital is not just a growth driver, it's a revenue multiplier. At the close of the third quarter, digital represented less than 5% of total inventory, yet digital revenue accounted for 40% of our consolidated revenue and rose 20% during the period compared to the third quarter of last year, excluding movements in foreign exchange rates. Looking at our digital footprint, in the US, we deployed 34 large format digital billboards during the third quarter, adding to our total with more than 1,600 digital billboards. Combined with our smaller format digital displays in airports and on shelters, we have more than 4,700 digital displays domestically. And in Europe, we added 366 digital displays in the third quarter for a total of 19,200 digital displays now live. As we expand our digital footprint, we're continuing to strengthen our data analytics offerings and build out a more sophisticated operational backend to the customer experience. These investments are allowing us to attract a greater pool of advertisers, which bodes well for our longer term outlook. As an example of the dynamism of our platform, I'd like to call out our airports team for the work they did developing a multi-year, multi-million dollar partnership and sponsorship with PenFed Credit Union. This first of its kind brand takeover of the Concourse C connector at Washington Dulles includes a 4,000 square foot digital media tunnel. It's really something to see, and we are working with PenFed on further opportunities. Looking at the fourth quarter, our business remains healthy, and we are on track to deliver results in line with the full year guidance we presented during our investor day in September. Brian will provide an update on our guidance and his prepared remarks, but I want to take a moment to focus on what we are seeing. As indicated in that full year guidance, we do expect growth to moderate in the fourth quarter as compared to the last few quarters, driven by tougher comps against the strong fourth quarter last year. Since September, we are not seeing a material change in advertiser behavior. In the US, advertising demand remains healthy, and we remain on track to exceed our record revenue in Q4 2021. Airports and digital continue to drive that improvement. In Europe, our business also remains healthy and is on track to outperform Q4 2019 and is in line with a very strong Q4 2021, excluding movements in FX rates, as we continue to benefit from the growth in our digital platform and the recovery in transit. Bookings and pacing continue to be strong in Northern Europe, particularly in the UK and Scandinavia, versus pre-COVID levels in 2019. However, there are still a few markets, primarily in parts of Southern Europe, that haven't fully rebounded. Looking further out, we're keeping a close eye on business trends across our markets. And so far, our 2023 upfront in the US is going well, and we remain optimistic about our business. Finally, we continue to conduct a review of strategic alternatives for our European business with the goal of optimizing our portfolio in the best interest of our shareholders with the resulting greater focus on our core America's business. We will communicate further details as and when we are able. And with that, let me now turn it over to Brian to discuss our third quarter financial results, as well as our fourth quarter guidance.

Thank you, Scott. Good morning, everyone, and thank you for joining our call. As Scott mentioned, we had another great quarter, and we believe our business is on track to achieve the full year guidance we provided during our investor day, as you will see on slide 14. Moving on to the third quarter results on slide five. Before discussing these results, I want to remind everyone that during our discussion of GAAP results, I'll also talk about our results excluding movements in foreign exchange rates, a non-GAAP measure. We believe this provides greater comparability when evaluating our performance. In addition, as a reminder, Direct operating expenses and SG&A expenses include restructuring and other costs that are excluded from adjusted EBITDA and segment adjusted EBITDA. To avoid repetition, the amounts I refer to are for the third quarter of 2022 and the percent changes are third quarter 2022 compared to the third quarter of 2021 unless otherwise noted. Consolidated revenue was $603 million, a 1.1% increase. Excluding movements in foreign exchange rates, consolidated revenue was up 7.8% to $643 million, at the high end of our consolidated revenue guidance range of $625 to $645 million. Net loss was $39 million, a slight improvement over the prior year's $41 million. Adjusted EBITDA was $129 million, down 5% compared to $136 million in the third quarter of 2021. Excluding movements in foreign exchange, adjusted EBITDA was $131 million, down 3.8%. Please turn to slide six for a review of the America's third quarter results. America's revenue was $347 million, up 9%, and in line with our guidance range of $340 to $350 million. And even more significant, we continue to surpass pre-COVID revenue levels, with revenue up 6% compared to Q3 of 2019. Revenue increased across all major product categories, most notably airport displays. Digital revenue, which accounted for 39% of America's revenue, was up 16.6% to $134 million, driven by both airports and billboards. National sales, which accounted for 39.7% of America's revenue, was up 8%, with local sales accounting for 60.3% of America's revenue and up 9%. Direct operating and SG&A expenses were up 12.1%. The increase is primarily due to a 10.2% increase in site lease expense to $114 million, driven by higher revenue primarily in our airports business, partially offset by a small increase in negotiated rent abatements. Segment adjusted EBITDA was $145 million, up 4.1%, with segment adjusted EBITDA margin of 41.8%. down from Q3 2021, primarily due to mix, and as expected, in line with Q3 2019. Turning to slide 7. This slide breaks out our America's revenue into billboard and other and transit. Billboard and other, which primarily includes revenues from bulletins, posters, street furniture displays, spectaculars, and wall scapes, was up 2.6% to $280 million. This performance was driven primarily by strength in our California, Southwest, and Midwest regions. Transit was up 44.7%, with airport display revenue up 45% to $62 million, driven by growth across the portfolio, including Port Authority. Now on slide A for a bit more detail on Billboard and others. Billboard and other digital revenues continued to rebound in the third quarter and was up 6.8% to $98 million, and now accounts worth 34.8% of total billboard and other revenue, an increase over Q2. Non-digital billboard and other revenue was up slightly. Next, please turn to slide 9 for a review of our performance in Europe in the third quarter. My commentary is on results that have been adjusted to exclude movements in foreign exchange rates. Europe revenue increased 6.1% to $279 million at the high end of the guidance range of $270 to $280 million. The increase was driven by improvements in transit and street furniture display, with revenue up in most countries, most notably Sweden, partially offset by a decline in France. Europe revenue was also up compared to the 2019 comparable period, and the growth rate was higher than the increase we saw in the second quarter of 2022 versus the second quarter of 2019, adjusting for movements in FX rates. Digital accounted for 40.8% of Europe's total revenue and was up 22.4%, driven by an increase in the number of digital assets and a strong rebound in demand in Scandinavia, including on our transit assets. Direct operating and SG&A expenses were up 5.6%. The increase was primarily driven by increased site lease expense which was up 22.1%, resulting from a $9 million reduction in negotiated rent abatements, as well as lower governmental rent subsidies and higher revenue. Segment adjusted EBITDA was $18 million, and the segment adjusted EBITDA margin was 6.5%. Both down as compared to the prior year due in part to the one-time reduction in site lease expense in the prior year. Segment adjusted EBITDA margin was slightly ahead of Q3 2019 segment adjusted EBITDA margin. Moving on to CCIBV. 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 CCIVV's operating income or loss and adjusted EBITDA. Europe and CCIVV revenue decreased 23 million during the third quarter of 2022 compared to the same period of 2021 to $239 million. After adjusting for a $39 million impact from movements in foreign exchange rates, Europe and CCIVV revenue increased 16.1 million. CCIBV operating loss was $14 million in the third quarter of 2022 compared to an operating loss of $26 million in the same period of 2021. Let's move to slide 10 and a quick review of other, which consists of our Latin American operations. Similar to Europe, my commentary is on results that have been adjusted to exclude movements in foreign exchange rates. Other revenue was up 19.1% driven by improvements in most countries. Direct operating and SGA expenses were up 5%, driven by higher site lease expense, primarily related to higher revenue. And segment-adjusted EBITDA was $3 million, an improvement over the prior year's break-even segment-adjusted EBITDA. Now, moving to slide 11 and a review of capital expenditures. CapEx totaled $43 million, an increase of $11 million, compared to the third quarter of the prior year as we ramped up our spending, particularly on digital displays in the Americas. In addition to our capital expenditures, I also want to highlight that during the third quarter, we made several asset acquisitions, totaling $28 million in our Americas segment. Now on to slide 12. Here today, cash and cash equivalents declined $83 million to $327 million as of September 30, 2022. And during the third quarter, cash and cash equivalents increased $13 million. Adjusted EBITDA of $129 million and changes in net working capital contributed positively to our cash balance for the quarter and was partially offset by cash interest payments and net capital investment. Our debt was $5.6 billion as of September 30, 2022, a slight decline from 2021 year end. primarily due to scheduled quarterly principal payments on the term loan facility. Cash paid for interest on the debt was $56 million during the third quarter, an increase of $4 million compared to the same period in the prior year, primarily due to the higher floating rate interest on our term loan fee facility. Our weighted average cost of debt was 6.5%, an increase from year end due to the increase in LIBOR rates. Our liquidity was $543 million as of September 30, 2022, down compared to liquidity at year-end, primarily due to the reduction in cash. As of September 30, 2022, our first lien leverage ratio was 4.98 times, well below the covenant threshold of 7.1 times. Turning to slide 13 in our new metric, AFFO. As you may know, during our investor day, we introduced a new metric for the company. adjusted funds from operations, AFFO. In the third quarter, we generated $24 million and year-to-date $91 million of AFFO, excluding movements and FX rates. Moving on to slide 14 and our guidance for the fourth quarter and the full year 2022. As Scott mentioned, we haven't seen a material change in advertiser behavior and we are able to confirm that our fourth quarter revenue guidance is expected to be within the guidance range we provided during our investor day on September 8th. Our only update to our fiscal year 2022 guidance is consolidated net loss, which increased primarily due to movements and FX rates. I won't read through all the line items on this page, but do want to highlight a few updates to our guidance. We believe our consolidated revenue will be between $740 million and $765 million in Q4 of 2022, excluding movements in foreign exchange rates. America's revenue is expected to be between $370 million and $380 million. Additionally, we believe America's segment-adjusted EBITDA will be at the low end of the provided guidance range, primarily due to uncertainty around the timing of certain anticipated rent abatements, as well as softer performance in programmatic. Europe's revenue is expected to be between $345 million and 360 million, excluding movements in foreign exchange rates. Based on month and October exchange rates, foreign currency could result in a 15% headwind to year-over-year reported revenue growth in Europe's fourth quarter. Additionally, our cash interest payment obligations for 2022 will remain at $341 million, including $124 million in the remainder of this year. However, cash interest payment obligations for 2023 expected to increase to $404 million as a result of higher floating rate interest on our Term Loan B facility. This guidance assumes interest rates remain at current levels and that we do not refinance or incur additional indebtedness. Lastly, I do want to touch on 2023. Our visibility into 2023 is limited and we are well aware of concerns regarding the macro environment next year. However, We have proven our ability to pivot in prior recessionary periods, including in 2020 with the pandemic, and believe we know how to quickly adjust our expenses and preserve liquidity if needed in the future. And now, let me turn this call back over to Scott for his closing remarks.

Thanks, Brian. Our business remains healthy, and we're confident in our strategy and optimistic about the growth opportunities ahead for us. I'd like to thank our entire team for their dedication in executing on our strategic priorities, including accelerating our digital transformation, improving customer centricity, and driving executional excellence. We believe these efforts are enabling us to strengthen our competitive position and to capture a greater share of advertising budgets in the future. And now, let me turn over the call to the operator for the Q&A session, and Justin Cochran, our CEO of Europe, will join us on the call.

Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad.

If you change your mind, please press star two. The first question we have from the phone lines today comes from Stephen Garhill of Wells Fargo.

Please go ahead. Your line is open.

Thank you. Good morning, everybody. Could you talk about the overlap between digital customers and print customers that you're seeing in Americas? It just seems like the digital spend, you know, it's really growing nicely to that near 40% level. So is that incremental from existing out of home advertisers? Or do you have any sense if you're seeing new customers who are digitally kind of digital only come into the market? And based on that growth, do you have any expectation to increase your digital capex in 2023? And then I've got a follow-up.

Okay. Hey, Steve, thanks for the question. You know, digital is interesting, and the answer to your question is all of the above. We definitely have, I mean, I think the thing that has brought the new to the category buyers more than digital is has been programmatic. I think that's where we've had more new to the category buyers come in. But digital, you know, really since we started doing it, has been partly incremental but also partly amplification. So we have a lot of clients that will buy print campaigns and then use digital to supplement them and to do calls to action and to do things that only digital can do. And a lot of the current success you're seeing with digital is because in our modern airport build-outs, digital is such a central part of what we do. It's really taking off in that airport sector. So, you know, it's really the customer base, it's hard to say that it's any one thing, but it's pretty broad. As far as your second part about CapEx, You know, we really, on the roadside part of the business, we have really not constrained that. That's been paced more or less at our ability to navigate regulations and get the ability to do the conversions. It is something that is a regular part of our discussions. And if you interviewed our regional managers and branch presidents, they would tell you that there's a lot of emphasis on finding great locations to convert to digital. but that's not really particularly different than it's been. But let's go ahead with your next part of your question.

Yeah, thanks for that. The next part would be just about the airport revenue. I was wondering if you have historical data of how airport tends to perform in a recession. I think it's still getting back to kind of pre-COVID levels, so travel still seems like it's pretty strong. Is your expectation if the macro turns over, does airport kind of do better than the rest of the portfolio? Does it do, is it a little more cyclical than the rest of the portfolio? And then maybe just lastly, just wondering if you expect much in the way of rent abatements for 2023. Thank you.

Sure, sure. So on airports, it's a really good question because really the airports as we have them are quite different from any prior cycle other than maybe COVID. And what I mean by that, I referenced before how much digital has become a central part of them. If you go back to the great financial crisis or to 9-11, which would have been the two big disruptions to airports in recent history, print was much more part of the business. And it just behaves differently than digital does, as we've seen across the the spectrum. I do think the thing that has come out of COVID is that advertisers who came back early have really seen impact from their airport campaigns. And I guess the thing that I'd really emphasize is that it's not only that the assets are different, but how we sell them are structurally different. A meaningful chunk of the revenue in airports is coming from our local sales teams. That was not the case in prior recessions. And one of the questions I get as I go around the country is people asking for airports in their communities because it's becoming an attractive area for account executives to find big customers who want to do bold things. And I think that so we're selling a good part of it to our local branches so it's a more diversified sales base. And we're also doing a lot more like what I referred to in the opening comments like with PenFed, where we're actually doing things that are more akin to sponsorships than advertising. And so I think that there are, you know, the degree to which it's digital would be something that you could look at and say, well, that's going to be responsive in a recession. It's going to be reactionary in a recession. On the flip side, the broader sales base, the broader customer base, because we've done a good job expanding that, and the proliferation of sponsorships makes it a bit more sticky. So hopefully that gives you a flavor. And on abatements, we are still working through some. I think we characterize that as in Europe, we probably are done with anything that's going to be forthcoming relating to COVID. In the US, we have a tale of things that we are still working. But they'll be nothing like they were in terms of magnitude that they were in 21 or even this year. So hopefully that helps. Thank you, Steve.

Thanks, Scott.

Thank you. We now have Ben Sinburn of Morgan Stanley. Your line is now open, Ben.

Thank you. Good morning, everyone. Scott, I was wondering, you talked about programmatic being a key tailwind to digital adoption, digital growth, but I think you also cited it as maybe a source of weakness among your channels this quarter, which we've heard that from a number of players around media. Is there anything more to that in your mind than just that's where it's easy to dial it up, dial it down? Or do you think there's other things that are either that's telling us about where the broader business is headed or Or are there things that you think you can do with your programmatic channels to maybe improve either their market share or sort of the stickiness of the money? I'd love to get your thoughts on that since we're all trying to read the tea leaves.

Yeah, and Ben, that's the exact right characterization. It's still very much in the tea leaves stage with programmatic. I don't think that we are anywhere near – we are not near a steady state. You know, just this year, the Trade Desk and DB360 have gotten involved in out-of-home programmatic in a meaningful way, and as a couple of the biggest, you know, omni-channel DSPs, what their impact is going to be on this space I think is still very much an unknown. When I look at what's gone on this year, I think there's a few things that that have happened in, in out of home programmatic. I mean, I think first and most obvious is what you said, which is it's the super easy channel to turn on and turn off and where people are doing more promotional spend. Um, you know, that, that's something that they've maybe dialed back quicker and that we've seen in some of the mainstream, you know, digital advertising, um, parties that they've, they've seen that, that impact. Um, on the, on the flip side, you have, um, a lot of the programmatic space in out of home greatly expanded this year in terms of the number of screens. So if you looked at the screens available for digital out of home in January of this year, and you looked at it now, you would see a massive amount more screens available. And a lot of those screens are in places that were hit extremely hard by COVID. And so part of why I think what kind of happened is that the roadside programmatic came back first and that over the course of this year, you've had, you know, mall-based and elevator-based and gym-based, all the other kind of locations that out of home happens has had a better run. And that was particularly true in the first half. I'm not sure, I don't have my finger on the pulse of exactly what they're seeing, but That proliferation of screens is something that I think has to get normalized and the marketplace has to sort out how it thinks about the different types of out-of-home programmatic. And we're still, again, in very early innings of people getting understanding of it. And then I think the last thing I'd call out, in addition to roadside being first to really take off coming out of COVID in programmatic, you know, Q4 of last year was just a monster quarter. It's hard to synthesize it or remember it even right now with the year that we've had from a macro perspective and all of the different concerns that have come up, whether it's war or inflation or recession or interest rates. I mean, pick your list. But Q4 of last year, programmatic was absolutely positively on fire. And that's probably, you know, I'm sure we're going to talk a little bit about our relative pacing heading into Q4. But that's one of the big drivers of why we're not seeing. It's not that it's shrinking, or it's not shrinking a lot. The jury's out on whether it's going to grow much or not. But it's certainly not having the kind of tailwind that it had last year. So hopefully that gives you some insight into what's going on in programmatic.

Yeah. Yeah, no, that's really helpful. And then I don't know if, Brian, I don't think you mentioned this in your prepared remarks, but just now that we're three-quarters into the year, any update on sort of free cash flow expectations for the full year, which I guess is essentially asking about working capital with three months left, or anything else that you think we should be thinking about?

Yeah, I mean, I don't have anything incremental to add to what kind of guidance and information we put out there. I mean, I think we continue... to operationally show improvement. We've got a bit of a headwind with interest rate increases because we do have some variable rate exposure. And so that may delay kind of the point where free cash flow positivity comes into play. But we're looking to continue to grow the business even with the headwinds are out there. And I think 2023 will be a big year for us. Thank you.

Thanks, Beth.

Thank you. We now have Lance Vitanza of Cowen. Please go ahead when you're ready.

Hi, thanks guys for taking the question. Nice job on the quarter. I wanted to go back to airport advertising. Would you say that just across the industry, advertising has returned faster or slower than the pace of actual airport travel? And really what I'm trying to get at here is just simply, do you think you have much of a tailwind left? Putting aside any possible recession, do you think you have much of a tailwind left to the extent international business travel continues to rebound?

Thanks, Lance. Yeah, no, it's a good question. And I think you've heard all of the out-of-home transit-oriented operators talk about the audience doesn't have to get back to 100% of where you were to have the ad dollars get back. And it's a little different in the different types of transit, but I'd say that's been true. Certainly our results would say that's been true in airports. We are back at 2019 levels in many of our airports. But the ad revenue has probably come back. It's come back a little bit faster than the passengers have. I think the airport advertisers are pretty savvy to this in terms of looking at the expected passenger trends and the expected travel trends. And I think one of the things, particularly for airports that has resonated with people, is that even if they're not business travelers on business travel, the audience in an airport has a lot of business decision makers. Typically, and so, you know, for the B2B particularly audience, that's been a strength. So I don't know that I'd characterize, I mean, if you just look at it mechanically, our comps on airports are overlapping now. Really with Q4, it kind of is full on overlapping a, you know, full bore kind of quarter in terms of airport performance. So where we had even triple-digit growth in airports early this year, you're not going to be seeing that going forward. And it's going to be part of our overall percent growth slowing a bit as things go. But it doesn't actually mean that we're taking a step back. It just means that the relative growth rate is lower.

Okay. And then just one last one for me, if I could, which is, um, in the Americas on the static side, barely grew in the quarter. And I'm wondering, was there anything in particular to depress growth there, or is that sort of the new normal for static? I mean, is there just kind of little to no growth going forward or was the third quarter somewhat of an anomaly? Um, or is this just moderating advertiser demand global macro headwinds?

I, it's definitely not the last one. Um, What I'd say is, you know, we've talked all year. I think I've talked to you a couple times about this, about insurance. One of, well, a couple of the insurance players that have been way, way, way down this year, including, you know, Q3 relative to 2021, was a big print advertising, you know, advertiser. And so that has been a headwind for that industry. type of inventory all year. We feel good about what we're doing with our printed assets. We feel like there's good advertising demand. We've got opportunity to backfill some of that. We maybe didn't get quite as much of it in Q3 as we would have liked. As I look across the system, you know, we're in a more, you know, I hate to use the word normal because there's not a lot normal about these times, but it's a little bit more of a normal dynamic in that what you have are big city versus small city versus medium city dynamics you have east coast versus west coast versus southwest dynamics and you know in in the the setup when you look at printed it's a very different story in the northeast where it's not a good story versus say in california where it's a quite good story and so i'd say that the fact that it's sort of flat is just a little bit of an artifact of a moment and probably not anything to read a trend into.

Very helpful. Thank you.

Thanks, Lance.

Thanks. We now have the next question from Alan Watts of Deutsche Bank. Please go ahead when you're ready, Alan.

Hi, everyone. Thank you for having me on. Brian, just a follow-up on your comfort level with liquidity as we roll into 2023, just given the macro concerns, the increased debt service you highlighted. And maybe you can just also comment in this. You see working capital returning to a more normalized pattern than 23. And relatedly, your revolvers are undrawn. You mentioned your 7.1 times covenant. Remind us what restrictions there are for you to access those facilities.

Sure. Look, I think on liquidity, we continue to feel good. We obviously will keep a sharp eye on liquidity levels. We talked a little bit about rising interest rates and higher cash interest expense. And so that's certainly something that is a headwind that we'll have to keep our minds on. But operationally, things feel good, all things considered. And so I think we feel good about our liquidity position. I also do think as we get into 2023, you'll see a normalization of working capital back to, you know, generally back to pre-COVID levels. Now keep in mind, we have significant seasonal working capital fluctuations. You know, piggybacking off an earlier question, you know, Q4 is a strong quarter for us, but we actually don't collect a lot of that revenue into Q1, which is a weaker quarter for us. So you'll see a big working capital shift there. So I do think generally we feel pretty good, but it is a volatile environment. And so we'll want to make sure that we stay on top of things. Key to that is availability under revolvers. They're currently undrawn. We use them for letter of credit purposes, but we have significant undrawn liquidity capacity there. And we only have one financial covenants. That's the one you spoke of. So that first lien leverage ratio, we're just under five times the covenants you know, I think 7.1 times currently. And so there's plenty of room there. And so, you know, we've got liquidity capacity in the form of cash. We've got liquidity capacity in the form of availability under our cash flow and our ABL revolver. And I think we're feeling pretty good about where we are all things considered.

All right. That's really helpful, Brian. Thank you for that. And Scott, I don't know if I can get anything on this, but with regards to the strategic review, does the focus remain on select geographies in Europe versus sort of the whole pie? And have any talks moved to an advanced stage despite the obvious headwinds in the capital markets and the macro backdrop?

Yeah, you're right. I can't say a lot about that one. I mean, I'd just say that the message that we gave at our investor day and that we sort of referenced in the conversation early on, the comments, the prepared comments, stands that, you know, we're looking at a subset of the businesses. You know, we're focused on optimizing shareholder value. And, you know, the reality on dealmaking environments, yeah, this is a tough one. But when you have assets that are interesting and you have counterparties that are motivated anything is possible and i can't speak to any specifics but um you know we're we're committed to giving uh the street updates as and when we have anything material that we can say okay thank you appreciate the time thank you thank you we now have richard cho of jp morgan please go ahead when you're ready

Hi, I wanted to follow up on programmatic. You've talked about it being kind of back-end loaded in the quarters in the past. Was it more soft throughout the entire quarter versus back-end loaded?

So programmatic, every quarter has a little different seasonality to it. There are certain months of the year that are sort of spiky months. You know, like for instance, May might actually be a heavier month than June in a demand profile. Certainly in Q4, December is the bellwether on the seasonality in quarter, if you will. But we're at a point where we can actually understand something of what the demand environment is based on our daily sales with it. So, I mean, it's a business that's really unlike the rest of the outdoor business. It's more of a volume retail business, if you will, where you can kind of look at your weekly sales and get a sense of, okay, this week is like way below where it should be or this week is way above where it should be and kind of discern the trends from that. So, and we have the added visibility that we get by having a sales force that's out talking to people about campaigns that we do get, you know, some modicum of a pipeline. But it is typically heavier at the ends of the quarters. You know, this year it has been more subdued but we've had months that beat 2021 and we've had months that are, you know, ahead of 20, behind 2021 that, you know, so far this year are adding up to a kind of flattish experience overall in it for us. I mean, that's about as much detail as I think I can give, probably a little more than I even should.

Great. Thanks for the color on that. In terms of the static billboard market, Can you talk a little bit about what you're seeing in maybe your top markets, tier one cities versus maybe some of the smaller? Is there any difference there between the demand or pricing?

It's interesting. You think of tier one cities and you start marching down DMAs and you think it's just you know, stair-step according to how big and how developed they are. It's actually, that's not at all the market environment. So the interesting thing in the environment, and this is not unprecedented at a home, you have kind of LA and New York, which are their own thing. And both of them have higher penetration of out-of-home and media mix than other cities do. Both of them are cities that, you know, drive the economics of at least some of the big players in the space. And they're behaving very strongly. As you get to the next wave of big cities, though, a lot of those big cities are not as strong. And there's a demand part to it just in terms of you can't underestimate the value of having the weight of media and social influencers and entertainment in those couple of real top markets. And then you go and you look at the bottom end of market size within our portfolio. We don't go that small, but our strongest performances, particularly in printed, are in the smaller markets, the smaller and mid-sized markets. And that's a function of supply and demand, and it's a function of Those economies are all pretty healthy and they continue to perform. So you saw in our numbers a very balanced local national performance and that's probably at some level just because we don't have as much inventory in the mega national locations, particularly New York, as we ideally might. in order to benefit from the strength in the kind of top two markets. But it's an interesting market, and I think one of the other players talked about this, about, you know, mid-sized is better than the smallest of the small. The sweet spot is just it's always moving, and right now it's kind of in that, you know, upper mid-sized kind of city has just good demand environments.

Great. And the last one for me, you know, as Anna said, the long-term guidance is for 4% to 6%. Is there any reason to think that next year wouldn't be in that range?

Yeah, we haven't made any adjustments to the guidance beyond what we said, Richard.

But we're also not giving a, you know, 2023 estimate. I think it's important for us not to not to lock you in too much because there's still an awful lot for us to learn. We're really in the early innings of our upfront. It is going well, as I said, in the prepared comments. But, you know, by the time we're talking in February, we're going to be able to give you a much more fulsome picture of what the year looks like.

That's fair.

I didn't realize it was 2023.

I thought he was asking 2023, but I think you're right. Yeah, my apologies. So we talked about 2022. We won't come out with 2023 until sometime in the future.

Yeah, it was 2023, so thank you.

Oh, that's it for me.

We now have Jim Goss. of Barrington Research.

Please go ahead when you're ready, Jim.

All right, thank you. Actually, I did want to talk about upfronts. I wonder if you could characterize various aspects of it in the way you approach it in terms of the share of the revenue base that's involved, the timing, the range of values you'd sell, and the pricing, and if to the extent there are sort of make goods exposure, if you will, how you satisfy that.

Yeah, so loaded with data points in there, Jim, that's a big question. And I think I'll start with saying that we call them up-fronts for lack of a better word, but just for all the media analysts out there, this is not at all remotely like the TV up-fronts. We don't have, you know, a week where everybody's in town and there's big events and Lots of announcements about new content. What this is, this is the season where we go through our perm renewals. And I don't think we've given a ton of detail on the perms, but I think you could kind of figure it out from, and this is a U.S. phenomenon. Let me just be very clear about that, too. So this is a U.S. thing, and it's not at all like the TV thing. And we've never really given too much dimensioning on it, but Rough justice, it's half the business. And that's sort of things that have longer than six-month contracts-ish. This isn't something we're going to start giving a lot more disclosure on, but I don't think there's a lot of harm in giving you a rough feel for that. And what happens is we're on a cycle of Most of our marquee assets, which would be the things that are most relevant for PERMs, we have backup customers lined up and we have multiple paths to getting occupancy on them. Let's say the renewal is a December 1st renewal. We'll start working that December 1st renewal over the summer and try to get a feel for whether the advertiser that's currently incumbent is on for the next year. see what they think of the price increase that we're going to put forward, which, you know, tends to be something that we look at relative to what's going on in the economy as well as traffic growth rates, which generally only move in a positive direction. And so you'll go through a process with them and, you know, Sometimes they will opt out and you'll then go to your backup advertisers and kind of fundamentally reprice the asset, which is usually advantageous to us versus continuing with the existing customer. But we do strive to have the existing customer pick up the tab for things that are underlying cost growth. It's such a diverse array. I mean you're talking about things that you could have a perm on something that is six figures of revenue a period for one location to a perm on something that is four figures. So the negotiation is it's different sales forces, it's different parts of the team, it's different levels of executive involvement that come into play with it. But that's kind of what happens during our upfront. And we keep close tabs particularly on, you know, the top 15, 20% of our inventory. And we look at trends in terms of are we getting good rate increases? Are we getting good renewal rates? You know, et cetera. And when I characterize it as going well kind of a month in, that's really what I mean is that we are seeing, Healthy increases, we're seeing healthy demand, and we will be watching this and working this very hard over the next few months.

Okay, that's very helpful because it certainly helps improve the confidence you have and the projections you give all of us then.

That's why we kind of hold off until February to give the look at the full year because then we will have a goodly part of our business already booked.

Okay. Another question without going too far down the road of how you're going to potentially split up assets. I wonder if there would be some organizational structure that might differ for example if you have fewer international markets might each of them be separate markets since they probably don't interrelate all that much given the nature of your business and would that be a level of management and cost that you might be able to count as a savings and does whatever structure you come up with have some impact in terms of the debt that you have internationally.

Sure. So a couple thoughts on that with all the caveats that I gave Aaron about, you know, there's just so much we're able to say. It's definitely premature to talk too much about structure until we, you know, have divestitures. But I would assure you we have a plan if we are able to do the divestitures that we do, we will absolutely have structural savings. Probably wouldn't operate the way you suggest because the way that it makes sense to have an in-region CEO for what asset base we have left. It's not going to be a teeny tiny stub. It's going to be a meaningful chunk of business and a meaningful, I'll just leave it at that. Should we be successful in the endeavors that we're in? So I do think that there would be savings, but it's definitely premature to speculate on the structure. And there was another part of your question, I think I lost it as I was trying to think through how I was going to answer that first part without getting in too much trouble. It may have been with respect to this. Oh, the BB. Yeah, yeah.

Yeah, I think whatever we do is going to be compliant with the intention, so I wouldn't anticipate any significant structural changes because it would likely be limited by the intention as long as there's debt outstanding. And I think the only other thing I would add is, if and when things do continue, that could create some reporting differences. But until that happens, I don't envision that either.

Okay. And the last thing, M&A hasn't come up yet. That should be at the top of your list right now. But how do you view property availability in this stage of the cycle in the economy and your feeling as to your capacity to take advantage of opportunities you might see?

So I take it that this is a US question. Yeah, yeah. So there's definitely still willing sellers and willing buyers. I think you've seen all of the US based out-of-home companies have had a pretty active M&A agenda. For us, We need to keep an eye on that liquidity question that has come up in a couple of different ways as we went. Obviously, all things balance sheet related come into play on it. I definitely think it remains a good environment to transact, but obviously with credit markets like they are, And with the macro what it is, we're going to be keeping a very careful eye to the words you said. It's not the top of our list of things that we need to be doing. But at the same time, we want to make sure that we're not missing out on assets that would be a great fit with our platform.

All right. Thanks very much.

Thanks, Jim.

Thank you.

We have no further questions on the line, so I'd like to hand it back to the management team for any final remarks.

Great. Thank you. Thank you very much. We appreciate the questions. We appreciate everyone's interest. We feel good about the business, and we're looking excited to finish the year strong and get 2023 set up to be a year of growth for us. So we're excited. We're very optimistic about where things are headed, and we appreciate everybody's time. Have a great day.

Thank you all for joining. That does conclude today's call. Thank you. You may now disconnect your line.