Clear Channel Outdoor Holdings, Inc.

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 2023 first quarter operating performance of Clear Channel Outdoor Holdings, Inc., and Clear Channel International, BV. We recommend you download the earnings presentation located in the financial section in our investor website and review the presentation during this call. After an introduction and review of our results, we'll open the line for questions, and Justin Cochran, CEO of Clear Channel UK and 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 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 part of our earnings release and the earnings presentation. Also, please note that the information provided on this call speaks only to management's views as of today, May 9, 2023, and may no longer be accurate at the time of a replay. Please turn to slide four in the earnings presentation, and I will now turn the call over to Scott.

Good morning, everyone, and thank you for taking the time to join today's call. Our solid first quarter consolidated results reflect continued strong execution by our team, combined with overall healthy demand from advertisers, particularly for our digital assets. We delivered consolidated revenue of $561 million, excluding movements in foreign exchange rates, in line with our guidance and up approximately 6.6% as compared to the prior year period. The trends we saw in the fourth quarter largely continued into the new year, with the out-of-home industry demonstrating resilience. Advertisers are looking to tap into our growing audiences while recognizing the benefits stemming from our industry's embrace of digital technology. I'd like to call out our team for their focus and contributions as we continue to progress in leveraging the scale of our platform and technology strategy to make our solutions more data-driven, easier to buy, and faster to launch. We believe these efforts, combined with the breadth of our footprint, have strengthened our ability to drive business even as parts of our business come under pressure as we engage with a greater and more diverse pool of advertisers. During the quarter, we saw some weakness in revenue within the U.S. due to a few specific issues impacting certain national accounts. These included accounts doing layoffs. select categories like crypto and emerging tech, and select markets like San Francisco and Chicago, rather than broad macro events. Regardless, we are dissatisfied with the results in the U.S. and believe that we can improve as the year develops. Part of what gives us this belief is the good progress we've made in building our presence in the CPG arena, as well as in the pharma category where we have room to grow in the America segment. Business services, QSR, and amusements are all categories that remain notably strong as well. Further, in Europe North, we continue to experience healthy demand for our digital assets and our programmatic platform. Digital revenue accounted for 51% of Europe North's revenue and grew 16% compared to the first quarter of last year, excluding movements in foreign exchange rates. So we believe we are benefiting from a more stable and attractive business platform as we integrate the right kinds of digital technologies into how we operate and serve our customers. During the first quarter, digital accounted for 38% of our consolidated revenue and rose 9.7% compared to the first quarter of last year, excluding movements in foreign exchange rates. As we execute our operating strategy, We are also continuing to evaluate paths that we believe will enable us to enhance our balance sheet and maximize the value inherent in our business. We recently completed the divestiture of our business in Switzerland, generating $94 million in gross proceeds, and we plan to use the net proceeds from this transaction to improve our liquidity position. Additionally, we continue to review our low-margin and or low-priority European businesses. Turning to our outlook, as I mentioned, we are not seeing signs of broad macro-related pullback in our industry, and advertising demand remains healthy. However, at the country level, growth rates are expected to vary as the year develops. In our America segment, dialogues with advertisers remain positive, and we are encouraged by the trends we are seeing, which bodes well for the rest of the year. Thus far, the second quarter revenue is looking better than the first quarter in terms of year-over-year growth, and we anticipate the third and fourth quarters will perform better as well. We also believe airports' revenue should rebound strongly from Q1 and perform well for the rest of the year and beyond. In addition to the rebound in leisure travel, business travel continues to recover, and a recent study we conducted confirms that frequent flyers are highly engaged with our advertising platforms. We're providing brands with a very effective and efficient channel to influence these coveted audiences as they travel. In Europe, we're also continuing to see healthy demand across the majority of our markets, with no indication of a slowdown due to macro concerns. Europe North, which turned in a strong revenue performance in Q1, reflecting continued strength in certain markets, as well as a post-COVID rebound in our transit business, is expected to have tougher comps and therefore a slower growth rate in Q2. And Europe South, which also delivered a solid top-line revenue performance in Q1, is expected to have tougher comps due in large part to the sale of Switzerland, as well as the business trends normalizing and the unrest in France. Taken together, despite the slow start of the year in the U.S., overall we're encouraged by what we're seeing at this point, particularly given the macro uncertainties. Our full year guidance remains within the range we provided in February, with the exception of adjusting for the sale of Switzerland and reducing capital expenditures. As we execute our plan, we are keeping a close eye on trends across our markets and remain optimistic about our business. Brian will provide our guidance for both the second quarter and the full year. And with that, let me now turn it over to Brian.

Thank you, Scott. Good morning, everyone, and thank you for joining our call. Please turn to slide five. As Scott mentioned, our first quarter results were in line with our guidance and we remain optimistic regarding our outlook through the balance of the year. As a reminder, 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. Direct operating expenses and SG&A expenses include restructuring and other costs that are excluded from adjusted EBITDA and segment adjusted EBITDA. and the amounts I refer to are for the first quarter of 2023 and the percent changes are first quarter 2023 compared to first quarter of 2022 unless otherwise noted. Additionally, the sale of our Switzerland business was concluded on March 31st, 2023 and is included in our first quarter operating results but will not be included in our results going forward. Lastly, As we mentioned during our fourth quarter earnings call, we expanded the segments in our reported results. We now have four reportable segments. Americas has been separated into America and airports. Europe is now Europe North and Europe South, with Singapore included in Other along with Latin America. This is the first quarter we will provide the quarterly results with the new segment reporting. We have added a new feature to our investor website under the financials tab. called the Interactive Analyst Center. You can find our reported results for fiscal years 2019 through 2022, and 2022 quarterly results based on the new reporting segments on this site, as well as in our filings with the SEC. Now, on to the first quarter reported results. Consolidated revenue for the quarter was $545 million, a 3.8% increase, excluding movements in foreign exchange rates. Consolidated revenue was up 6.6% to $561 million at the high end of our consolidated revenue guidance of $540 to $565 million. Net loss was $35 million, an improvement over the prior year's net loss of $90 million. Adjusted EBITDA was $52 million, down 20.6%. Excluding movements in foreign exchange rates, adjusted EBITDA was $51 million, down 22.3%. The decline reflects the impact of increases in fixed site lease expense due to various factors, including new contracts, lower abatements, and the renegotiation of a large existing site lease contract, as well as revenue mix. AFFO was negative $57 million in the first quarter and negative $58 million excluding movements in foreign exchange rates. On to slide six for America's segment first quarter results. America revenue was $236 million, down 1.3%, reflecting a pullback in media in addition to telco and banking. However, as Scott mentioned, we continue to broaden our customer base as we leverage our investments in technology, and these efforts partially offset the overall impact of the aforementioned category-specific reductions on our overall America performance during the quarter. Digital revenue, which accounted for 33.1% of America revenue, was up 3.6% to $78 million. However, this increase was more than offset by declines in printed formats. National sales, which accounted for 33.1% of America revenue, were down 8.7%, primarily due to tough comps. Local sales accounted for 66.9% of America revenue and continued to deliver growth up 2.7%. Direct operating and SG&A expenses were up 11.1% to $155 million. The increase is primarily due to a 13.3% increase in site lease expense to $83 million, driven by new and amended contracts and lower rent abatements. Higher credit loss expense was driven by specific reserves for certain customers, and in our view, is not an indication of a broader weakness. In addition, higher compensation costs were driven by increased headcount. Segment adjusted EBITDA was $81 million, down 19% with segment adjusted EBITDA margin of 34.5% down from Q1 2022. Adjusting for the renegotiation of a large existing site lease contract we called out on our previous earnings call, margins would be close to pre-COVID levels. Please turn to slide 7 for a review of the first quarter results for airports. Airports revenue was $54 million, down 3.7%. The decline in revenue was driven primarily by the timing of specific campaign spending. Digital revenue, which accounted for 55% of airport revenue, was down 3.3% to $30 million. National sales, which accounted for 60.1% of airport revenue, were up 4.9%. Local sales accounted for 39.9% of airport's revenue and were down 14.4%. Direct operating and SG&A expenses were up 3.4% to $48 million. The increase is primarily due to a 4.7% increase in site lease expense of $36 million due in part to a normalization of airport payment terms. Segment adjusted EBITDA was $6 million, down 36.9% the segment-adjusted EBITDA margin of 11.6%. Next, please turn to slide 8 for a review of our performance in Europe North. My commentary on Europe North and Europe South is on results that have been adjusted to exclude movements in foreign exchange rates. Europe North revenue increased 14.9% to $140 million. Revenue was up across all products and in all countries, most notably Belgium, Sweden, and the United Kingdom. driven by increased demand and new contracts. Digital accounted for 51.1% of Europe North total revenue and was up 16.1% to 71.6 million, driven by growth in most countries, with the largest increase in the UK. Europe North direct operating and SG&A expenses were up 15% to 133 million. Site lease expense was up 13.6% to 62 million, mainly driven by higher revenue and new contracts. In addition, a mix of other operating expenses increased in the quarter, due in part to higher prices and increased sales activity. Europe North's segment-adjusted EBITDA was up 11.1% to $8 million, and the segment-adjusted EBITDA margin was 5.5%, in line with the prior year. Now on to slide 9 for our performance in Europe South. Europe South's segment revenue increased 25% to $112 million. As this segment has continued to recover from the adverse effects of COVID-19, we have seen increases in revenue driven by increased demand across all of our products, most notably street furniture, and in all of the countries in which we operate. Digital accounted for 20.3% of Europe's total revenue and was up 35.3% to 23 million, driven by increases in all countries with the largest growth in Spain. Europe South direct operating and SG&A expenses were up 12.8% to $125 million. Site lease expense was up 13.2% to $58 million, mainly driven by new contracts and higher revenue in addition to other operating costs. Europe South segment adjusted EBITDA was a negative $13 million, an improvement over the prior year's negative $22 million. Moving on to CCIBV on slide 10. Clear Channel International BV, referred to as CCI BV, is an indirect wholly owned subsidiary of the company and the issuer of our 6 and 5A senior secured notes to 2025. It includes the operations of our Europe North and Europe South segments, as well as Singapore, which following the changes to our reporting segments in the fourth quarter of 2022 is included in other. CCI BV revenue increased 11.7%, to $242 million from $217 million. Excluding movements in FX, CCIBV revenue increased 18.8% driven by increased demand and, to a lesser extent, new contracts. Singapore represented less than 3% of CCIBV revenue for the three months ended March 31, 2023. CCIBV operating income was $66 million compared to operating loss of $48 million in the same period of 2022. with the change primarily driven by a 96 million gain on the sale of our business in Switzerland. Now moving to slide 11 and our review of capital expenditures. CapEx totaled 38 million in the first quarter, an increase of 3 million over the prior year. We increased spending in America, airports, and Europe North, largely related to digital investments. CapEx spend in Europe South declined due to decreased investment in France and Spain, largely related to street furniture assets. Now on to slide 12. During the first quarter, cash and cash equivalents increased $53 million. The improvement was in part due to the cash proceeds received from the sale of Switzerland, adjusted EBITDA contribution, and lower working capital use partially offset by higher cash interest and capital investments. Our liquidity was $545 million as of March 31, 2023, up $44 million compared to liquidity at the end of the fourth quarter due to the increase in cash partially offset by the seasonality in our borrowing base. Our debt was $5.6 billion as of March 31st, 2023, basically flat with December 31st. Cash paid for interest on the debt was $72 million during the first quarter, an increase compared to the same period in the prior year, primarily due to higher interest rates on our term loan facility. Our weighted average cost of debt was 7.2%, a slight increase compared to the weighted average cost of debt as of December 31, 2022, due to the increase in floating rates. As of March 31, 2023, our first lien leverage ratio was 5.25 times, a slight increase as compared to December 31, 2022. The credit agreement covenant threshold is 7.1 times. Moving on to slide 13 in our guidance for the second quarter and the full year 2023. At this point in time, we believe our consolidated revenue will be between $635 and $660 million in Q2 of 2023, excluding movements in foreign exchange rates. We have updated our full year guidance to adjust for the sale of Switzerland. Excluding that change, our guidance remains within the range we provided in February, with the exception of a lower projection for capex spend. We expect revenue to be between $2.5 billion and $2.625 billion with adjusted EBITDA between $525 million and $585 million, both excluding movements in foreign exchange rates. AFFO guidance $65 million to $115 million excluding movements in foreign exchange rates down from fiscal year 2022 due primarily to increased interest expense. Capital expenditures are expected to be in the range of $165 and $185 million, with a continued focus on investing in our digital footprint in the U.S. Additionally, our cash interest payment obligations for 2023 are expected to be approximately $414 million, an increase over the prior year as a result of higher floating rate interest on our Term Loan B facility. This guidance assumes that we do not refinance or incur additional debt. And now, let me turn this call back over to Scott for his closing remarks.

Thanks, Brian. Looking ahead, we continue to expect a positive year for our business, and we remain well on track with regard to the annual guidance, as Brian noted. On the operating side, we remain focused on improving execution, investing in our digital transformation, and continuously improving the customer experience. At the same time, we remain committed to enhancing our balance sheet, including taking steps to support the cash generation of our business and ultimately reduce our debt. Before going to Q&A, I want to highlight our new Clear Channel Outdoor website on slide 14. This site is designed to be a strong lead funnel for our sales teams. As well, the enhanced user experience makes it easy for visitors to find the valuable information they're looking for from CCOA. The site highlights our new branding, visually shows the power of our medium, and tells users how they can get more by working with us versus other media companies. I encourage you to log on and experience the site. And now let me turn the call over to the operator for the Q&A session, and Justin Cochran will join us on the call.

Thank you. If you would like to ask a question, please press star followed by one on your telephone. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question today comes from Richard Cho from JPMorgan. Your line is open.

Hi, thank you. I just wanted to talk a little bit about the revenue guidance that you gave for the segments a little bit. Just what a little bit more color on the Americas business and the airport, if you could. Do you expect those categories to be up in a significant manner for the full year?

Do you want to take this one, Brian, or do you want... Yeah, I can take a stab at it, Scott, and you can come over the top. We don't provide segment guidance going forward, but I do think if you look at the Q1 performance for both of the businesses in America, so America and airports, I think some of the headwinds that were experienced in each of those segments are likely to dissipate going forward, and I would expect growth in both the Americas business and the airports business. We talk about airports. Some of the headwinds impacting airports is the timing of campaigns. We hope that those campaigns will come back over the rest of the year or that we're able to fill the pipeline with other things. I think we do expect improvement in the airport segment. I would say the same for the Americas segment. It's got some headwinds in the first quarter that we expect to dissipate, and we do expect top-line improvement. The first quarter is not the strongest quarter for this business. It's very seasonal, and then we've got some quarterly impacts. But I think both of the segments in America's American Airports will continue to improve as the year rolls on.

Yeah, I think the thing I'd add, Richard, is we are reiterating our guidance. And so in order to be able to do that, you know, the numbers that we put forth certainly had growth pretty much across the board. And you wouldn't be able to get the EBITDA growth that we're talking about in particular if the U.S. wasn't going to be performing. So hopefully that, you know, without getting into the business of trying to guide every individual segment, hopefully that gives you a sense of where we're coming from.

Got it. And I don't know how much you can comment on this, but with Europe, North and South kind of, you know, I guess normalizing and doing better and the numbers being, you know, more transferred to us at least, are you seeing more interest in those businesses? And do you think there is a better potential to, you know, sell more of the segments either by country or more as a group?

I mean, Richard, it's a great question. And I mean, I think as you think about Europe as a whole, when we announced that we were starting this process, we were still, frankly, in COVID. I mean, Omicron came after we announced it. And COVID was very hard on a number of the European markets. And so if you think about where we were when we started, And when we pivoted to doing country level, we had, you know, basically one good quarter, Q4 of 21, in our, you know, pocket and a plan. And what has happened subsequent to that is that the business has actually performed quite well, and it's been inconsistent country to country. But overall, you know, now we have a half dozen quarters left. under our belt. Not quite a half dozen yet, but it will be soon. And I do think that that will help us when the time comes for us to market the part of Europe that we've articulated since the middle of last year that's going to be higher margin and cash generative and so forth. So I do think it helps, but you have to recognize these processes, as we've all witnessed, are slow. And when you're dealing at a country level, you get into an awful lot of minutia that there's an awful lot of back and forth on. And you may well have agreed a price a lot earlier in a process than when you actually get to the completion of it. So the point being, this is not real-time bidding. This is, you know, advanced negotiation on the things that are actually in market right now. So hopefully that gives you a little bit of color without me telling you anything, you know, more granular that would get me in trouble.

No, thank you.

Our next question comes from Avi Steiner from J.P. Morgan. Your line is open.

Thank you. Good morning. A couple here. One, can we just dig in a little bit more into America?

You call that national account weakness rather than broader macro. If you could put it in context a little bit more, particularly as you guys remain confident for the year there. Thank you.

Thanks, Avi. You know, I think there's a couple things going on. I mean, we said this in our Q4 call, but maybe not everybody heard us, but the year started pretty rough. January and February were pretty rough years, particularly in the national account space, particularly in crypto and emerging tech. And what we have seen has been a steady progression of each month getting better. You heard us talk about in the Q4 call about how we had had the best upfront since we started recording it. And that is how the upfront wrapped up. And that gives us, that's what's driving a lot of the confidence that we have along with the dialogue that we're having. I mean, that outdoor does get planned a fair bit in advance. And so we've got a pretty good idea of what brands are planning to get after in the second part of the year. And so you take all of those different data points together and you take what's on our book right now, that's what gives us the confidence to say what we're saying about how things are developing. So there's a lot of data points into it. In terms of what actually happened, I think we tried to lay this out very granularly in the script. But we have a lot of exposure to San Francisco. And San Francisco was a very tough ad market in Q1. I think that if you talk to any of the other players associated with it, that would resonate. And that's, you know, it's our second biggest market. So that has a real impact on us. And that's both at the national and the local level. You know, in national, the emerging tech, again, overlap with the San Francisco thing. was a big deal relative particularly to the year prior where that had been a very vibrant category in Q1 of the prior year. So, I mean, I think those are the factors that contribute to what happened in Q1. And as we look forward, we do have a number of data points. You know, like everybody else, we're aware of the economy being a little bit murky and it being a little unclear today. you know, where the macro is headed. But I'm encouraged as we've had the bumps over time with various financial services institutions and whatnot in the headlines, we have continued to have good dialogue with advertisers and we continue to be booking business. So we feel good about how the year's going to develop. Terrific. Okay. It looks like free cash flow implied usage may be a little bit better here, the capex reduction a little bit more than the EBITDA related. Is that all related to Switzerland? Is there something else within that?

I'm not sure I follow the question. I know it was cash flow and then it kind of ended with the changes.

20 million of capex reduction

15 million of kind of midpoint EBITDA. If I'm thinking about it right, maybe my math is wrong.

I just want to make sure I'm not... Are we talking about adjusted guidance or still not tracking? I think that's what he's saying. Pull your guidance. Oh, yes. Okay.

So, well, I think it does reflect Switzerland. With respect to the CapEx number, it also reflects reduced anticipated spend in CapEx.

Okay. Okay. Two very quick ones here. Site lease expense in the first quarter, at least in America, is that the right run rate for the year?

And I apologize if you already said that.

I think our margins, deep down margins, are adjusted for one-time items. You know, are pretty similar to what we had in 2019, and I think that would be a decent run rate.

Again, recognizing that there is a lot of seasonality in the business. Q1 is the softest quarter for us every year, so it's going to have the lowest margins because as you flow more dollars through, you get that operating leverage. Perfect. Thank you. And then very last one for me.

You now have the cash in the door from Switzerland. Any changes to your prior answers on how you think about liquidity? Appreciate the time. Thank you.

No changes. We'll hold that cash on the balance sheet to help improve liquidity. And as you know, we'll need to reinvest it in the business percent of our debt documents, and that process continues. So no changes.

Thank you, everyone. Thanks, Avi.

Our next question comes from Stephen Cahill from Wells Fargo. Your line is open.

Good morning, this is Dan Osley on for Steve. Maybe just one for Scott, or actually for Brian. The digital conversion has been additive to the top line in America, but how should we be thinking about the margin impact of the growing mix shift, and has your outlook for operating leverage in the business changed at all?

We both can probably answer that one. Look, I think digital is... We do expect it to be margin accrued if we continue to invest in it. I kind of lost my train of thought on what the second part of the question was.

I think as you think over time, there's a lot that goes into the margin part of the question because the nature of do you own the ground under the sign versus do you have a fixed lease versus do you have a variable lease? And all of those things come into play. But over time, we do think digital should be a tailwind to margins. But the impact of that tailwind to the question we were answering with Avi is going to be a little different in a Q4 where we're in our heaviest quarter versus a Q1 where we're in our lightest quarter. But when you look at it over time, it should be a tailwind, but probably not, you know, transformational, I guess, is how I would answer that.

Great. That was all for us.

Thank you.

Thanks, Dan.

Our next question comes from Cameron McVeigh from Morgan Stanley. Your line is open. Go ahead.

Thanks. Good morning. Could you discuss the geographic mix, large market versus small market, and how that's driving growth and maybe the visibility so far into the second quarter?

I'm going to take from that that you're interested principally in the U.S. Is that a true statement, or should I be trying to give you a global answer?

Interested in both, but I'll take the U.S.

Okay. So we are predominantly a top 20 market company. We probably get 80% of our revenue from the top 20 DMAs in the U.S. And as you look internationally, most of our countries are going to be capital city oriented. It's not only, you know, certainly when you get to bigger countries like France and You know, France would be a little more like the U.S., where you would have some concentration in the biggest cities, but you have presence in a lot more cities. But I'm going to focus on the U.S. because I think that's where the most useful way to talk about it is. When you think about the out-of-home market in the U.S., there are kind of the top two cities, which are Los Angeles and New York, and we have – a very, very strong presence in Los Angeles, and we have a pretty strong presence in New York, principally on Times Square and in the airports, so we don't have a lot of street level in New York. But those two markets are the ones that are most impacted by national advertisers. The next 18 of the top 20 DMAs, are going to be a little bit more idiosyncratic of what an advertiser is trying to do as to whether they come in. And this is one of the things that is quite different about out-of-home versus television is that you don't have people that buy truly nationally, you know, where they're buying 200 DMAs and running their campaign everywhere. With out-of-home, it's a lot more they're trying to be targeted around which markets they're going to go into and depending what the product is and the campaign, it varies. And so in Q1, where national was soft, you know, we're impacted by that more than, you know, say Lamar, which is more focused on small markets and more on low or local, excuse me, local sales. And we're kind of impacted similarly locally. as out front and maybe even a little bit harder than out front because we don't have as good a footprint in New York potentially. So that's kind of how it plays out. But this is a business that you need to be developing those national accounts, but you also need to be developing regional and local accounts. You can't just kind of rely on one part of the mix to drive the business. So hopefully that gives you some color.

Got it. Yeah, that's helpful. One other follow-up. So you mentioned developing the CPG in pharma categories. I'm curious if you could go a little more into that approach and the value offering and why one of these advertisers would choose Clear Channel over another out-of-home operator. Thanks.

So... When you think about advertising with out-of-home, I think the first thing you want to think about is why somebody would choose out-of-home over other media as opposed to the driver of selecting one media owner versus another within out-of-home is going to be more driven by do they have assets in a place that a person wants to advertise. So, like, if you want to advertise in the New York airport's, you're going to need to work with Clear Channel. If you want to advertise in the New York subway, you're going to have to work with Outfront. That's how the business works, and that's the most stark differentiator. When we talk about building those categories, though, what we're getting at is we are working on bringing the insights and the data that those categories need in order to be confident that their marketing is working. And so in CPG, that might be looking at sales in particular retail channels. It might be looking at case sales from IRI and comparing that to the places that they ran campaigns. With pharmaceuticals, that would be looking at script generation. This is the cutting edge of where out-of-home is going in terms of being able to provide the same insight and confidence in marketing spend that has made digital so successful over the last decade. That's what we're getting at. It's less that we're necessarily trying to take out other out-of-home players. It's more that we're trying to pull money in from the digital channels and the the TV channels. I mean, we care about all of it, but in the end, the amount spent in out-of-home, if we spent all our time knocking the brains out of the other out-of-home players, that would not really be that helpful because it's not that big a part of ad spending. Hopefully that makes sense.

Got it. Thank you. Our next question comes from Aaron Watts with Deutsche Bank. Your line is open.

Hi, everyone. Thanks for having me on. Scott, any themes you'd call out on pricing and or occupancy across your U.S. footprint? Any greater pushback on pricing than you might have experienced over the last couple of years, given the macro backdrop?

Thanks, Aaron. You know, it's interesting. We've talked about this dynamic a little bit on recent earnings calls, but we continue to be in a very premium market in the sense that the most premium locations, there's more demand for them than there's supply and that's not just us, that's across all media owners. I hear this complaint frequently from agencies that they just can't lay their hands on the kind of iconic locations in key cities. And so that dynamic is very strong. It's a very strong occupancy dynamic and it's a very strong pricing dynamic. As you get down into You know, the next tier, which would be a lot of your major highway arterial signage, you know, that's a nice and healthy marketplace. We're not seeing a lot of pushback per se. It's less about the pricing and it's more about, you know, is the brand investing. The place where we're seeing dialogue with people is, I'm not sure if I'm going to launch my campaign this month because I'm not sure what's happening in the demand profile, but I want to be ready to launch it next month in case I feel like things are better. And that was really the state of the art of the conversation in January and February. That's part of why January and February were so rough, was you had a lot of people kind of waiting for the go signal. And I think as we got into March and particularly April and as we look out toward the rest of the year, we're feeling better that people are going to be placing those. So, you know, our yields are up. They're up more on price than on occupancy, but it does vary by the product and it does vary by, you know, where you are geographically in a market. Hopefully that gives you some color.

Now that's helpful. And just one other one, if I could, to circle back on some of your earlier comments around expenses and margins. Bridging the first quarter margins to those implied in your full year guide, the biggest driver of that, is that the layering on of revenue growth that you expect to see on the a bit more elevated expense base? Or are there other kind of big levers, maybe more on the expense side, that would move within that as well?

Yeah, I think it does reflect top line growth through the remainder of the year. And I think it also reflects as you roll forward through the quarters, some improvement in expense comparison. As the abatements started to trail off, that will be less of a headwind. It was a headwind in Q1. So I think those are probably some of the biggest drivers when we talk about comps as we roll through 23 quarters versus 22 quarters.

All right, and Brian, just remind me, were there any other larger lease renewals coming up similar to the one that you've called out, or that was really a bit of a one-off?

Well, I would say that's a one-off in terms of magnitude. We obviously have lots of leases that come up and are renegotiated, but I really view the rest of them as a portfolio and not materially impacting the business as they come up for renegotiation. Now, that all being said, we still have certain leases that reflect some COVID relief. It wasn't an abatement, but the terms of the lease were based on perhaps things that were impacted by COVID. And as we get out of COVID and have these comparative periods, that will continue to be you know, an expense item that we'll have to face. But to answer your question kind of directly, none of that rises to the magnitude of the one lease renegotiation that we've identified last quarter.

Okay. Appreciate the time. Thanks, guys. Thanks, Aaron.

Our next question comes from Jim Goss with Barrington Research. Your line is open.

All right. Thank you. I was wondering first, were the gains in Europe, do you think, more XSS, more recovery from the COVID era, or are they underlying growth?

I think it's a two-pronged story. I'll hit it, and maybe Scott or Justin wants to circle back up. I think in Southern Europe, it is largely a COVID story and the winning of some contracts. In Europe South, that business had not reached pre-COVID 2019 levels, and I think they are climbing back and approaching that in some markets at or better. So I think a lot of it is a COVID recovery story, but I don't want to set aside some of the victories that we've had in those countries, particularly in Spain, in terms of new contracts. So I think it's a mix of both. Northern Europe, on the other hand, I think largely have recovered from COVID. The exception would be some of our transit agreements, so it's kind of Scandinavian-heavy. That has been a recovery, particularly Q1. But there I think you see growth in the northern European markets. In places like Belgium and Denmark, it's contract winds that help drive the growth, and the UK has just continued use of the digital network that we have there.

from me. Justin, anything you'd add?

No, I think that was a very good summary, Brian. That's exactly what it is. There's a bit of COVID recovery coming back in the south and in transit. There is underlying growth in other markets, but I think Brian got it spot on.

Okay. And sort of on a related basis, I was interested in the discussion you just had about sort of the last four to six quarters gaining sort of information about each of the markets. And I'm wondering if Some of the good results in Europe are causing you to either slow down the process of seeking buyers, or does it wind up getting you more aggressive in price expectations? Or maybe you've chosen which markets you want to keep versus which markets you might want to sell, and maybe that shifts it around a little bit.

Yeah, I think, Jim, the thing about it is I think we've been real clear and real consistent that in the long term we see ourselves as a U.S.-focused business. But that doesn't mean that, you know, as we make that transition, our number one, two, and three goal is delivering value to our shareholders. And so you're absolutely right. As we get more data and as the businesses perform, it will give the counterparties more confidence in buying. It will give us more confidence in selling. And so, you know, we'll work our way through that. But the results that we're achieving there, they're not really a surprise to us. And we feel good about the assets we have. We feel good about the teams running them. The issue is just one of how do you manage your path through the process that we work through that in an environment where there's a lot of complexity. And so we're working it. We remain committed to that vision of being a U.S.-focused business, but we're not going to be foolish in doing transactions that are unattractive.

Okay, and one final one. Your assessment of the recession potential from your bottoms-up approach appears a little more encouraging than some of the macro observers. Is that a fair take?

I really can't get in the heads of other macro observers. I think I would characterize our view as positive. data-driven and based on what we can see. You know, we've been told, Jim, since March of 22 that the apocalypse was nigh and we've continued to run our business and bring in as much revenue and EBITDA as we can. And I think that's the mindset that I characterize that we have. We're looking to drive our business and bring in as much revenue and EBITDA as we can. In the end, that's what our shareholders care about, not about, you know, our macro forecasting in particular. Obviously, people want us to be forthright on what we see, which is what we're striving to do with the information that we shared today. But I can't really comment on, you know, our viewpoint relative to other macro forecasters.

All right. Thanks. That's helpful.

Our next question comes from Lance Betanza with TD Cohen. Your line is open.

Hi, thanks guys. A quick one on costs and then I'd like to talk about the domestic M&A environment. But on the cost side, just to confirm, you don't provide quarterly guidance on costs or EBITDA. So how did costs and EBITDA in the first quarter fall relative to your internal expectations?

Well, I think if I take Europe first, I think that there was some outperformance, and that's good, and the recovery in Southern Europe versus the COVID quarter, the reflection of some new contract wins exceeded expectations. Now, we were expecting COVID recovery, so maybe it's the pace of the recovery, but when you're talking about Europe, you also got to remember Q1 is really small relative to their business, and so large numbers that you have to put it in the right context. We talked about here at North, that business is just really performing strongly and so it's not surprising, but it was good to see the recovery in the transit business in Scandinavia. We don't have a lot of underground transit, but that's where our exposure is and it's coming back. But a lot of that growth is really, again, new contracts and the use of our digital networks, particularly in the United Kingdom. I think exceeded expectations in both Europe North and Europe South. We were disappointed in America. I can't say it was completely unexpected. We've known that we had some tough comps. Scott may want to weigh in on the top line, but I think on the cost side, you know, the abatements rolling off, we knew about. We had some credit charges that we don't think are reflective of the larger environment. They're, you know, two or three unique. situations that, you know, we do not expect to recur. That was a headwind. We have some contracts that are adjusting for the post-COVID environment. So I think I would say that, you know, the headwinds in Americas and airports, not unexpected, but, you know, we're disappointed. So I'll leave it at that, Scott. I don't know if you had more to say.

Yeah, I mean, I think we talked about it. I mean, we tried to be very explicit in the script that, this was not the expectation that we had, that we are dissatisfied with what America and airports did in Q1, and that we believe we're going to see improvement as the year builds. And, you know, when we worked to put our finger on the bottom line driver, the that revenue aspect of it, you know, operating leverage, we talk about it all the time because it is a really big thing. And so when your most attractive market doesn't deliver the revenue that you're aiming for, you know, that's going to be a big driver. And, again, we tried to be very explicit in the discussion of where those differences were.

Okay. No, thanks. I appreciate the follow-up there. And then on the domestic M&A, it looks like you're continuing to make some smallish acquisitions, presumably in the U.S. I see you spent another $6 million or so in the first quarter. Could you talk about the type of assets – and maybe even if you could just sort of remind me rough numbers, how much you spent on U.S. assets in 2022 – And then just sort of talk about where or what type, you know, national versus local or rural versus big city, airport versus billboard, just anything with respect to the strategy of kind of like what you're looking for as you continue to tweak the portfolio.

So I'm going to let Brian take the quantity question in terms of, and whatnot. I'm going to give him a minute to pull that up. But just in terms of philosophy, it is entirely U.S. roadside. When we talk about acquisitions, it's entirely U.S. roadside that we're doing. And that's 2022. It's entirely U.S. roadside, and we are doing acquisitions. These are not companies that we're buying for the most part. These are a few signs here and there. We're not picking up a lot of staff or a lot of – it's generally – if it goes really well, you pick up some easements where you have the ground underneath the sign – But we're looking for things that are accretive to our footprint and accretive to our P&L overall. Brian, you want to take the quantity question?

Sure. We're going to report CapEx and acquisitions of about $38 million for the quarter in 2023. We've given guidance on capital expenditures, the range $165 to $185 for the full year. In terms of just pure acquisitions, you know, in the quarter, we had about 6 million, mostly in Americas. There was some in Northern Europe, and then a reduction in Southern Europe. And so, largely digital in both Northern Europe and Americas, where we spent the CapEx in the acquisition, sorry, the acquisitions are largely in the U.S. and largely digital. I think on the acquisition side, that's not included in the CapEx guidance that we gave. That will remain small. I think we've got some in the pipeline we're likely to close. I think in the current business environment, we'll preserve liquidity. It won't have to be particularly accretive if we continue to pursue it, but I think it will largely be in this smallish tuck-in category unless the environment changes, and then we can become more aggressive.

Great. Thanks, guys.

Thanks, Lance. Thanks, Vince. This concludes our Q&A. I'll now hand back to Scott Wells, CEO, for any final remarks.

All right. Thank you very much, and thank you all for the questions. I mean, look, as we look out at the year, we feel good about where our business is headed. We feel good about our ability to bring in revenue and to drive growth over the course of the year. And as we look forward, We're hoping that we will be in a position to provide some updates on our European process in the coming quarters, and we appreciate everyone's engagement. But the bottom line is that we look forward and we feel good about our business. Have a great day, everyone.