Clear Channel Outdoor Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Clear Channel Hardware Holdings 2023 Second Quarter Earnings Conference Call. My name is Bruno, and I'll be operating your call today. During the presentation, you can register to ask a question by pressing star 1 on your telephone keypad. I will now turn the conference over to your host, Eileen McLaughlin, Vice President Investor of 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. They will provide an overview of the 2023 second 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 on 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 UK and Europe, will join Scott and Brian during 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 risk 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 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 the earning presentation. Also, please note that the information provided on this call speaks only to management's views as of today, August 7, 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. We delivered consolidated revenue of $636 million during the second quarter, excluding movements in foreign exchange rates, which was in line with our guidance, and up 3.5% as compared to the prior year, excluding the movements in foreign exchange rates and the sales of our former businesses in Switzerland and Italy. In addition, since our last quarterly call, we made notable progress on several facets of our strategic plan. Our results continue to be led by our digital assets, which accounted for 40.8% of our consolidated second quarter revenue and increased 7.3% compared to the prior year, excluding movements in foreign exchange rate and sold businesses. I'd like to thank our global team for their efforts running our business despite the ongoing strategic reviews and a more difficult operating environment. Your focus remains a critical ingredient for our success. In our America reporting segment, revenue was up compared to the prior year, with higher revenue in most markets partially offset by continued weakness in San Francisco. We continued to make inroads with new advertisers and categories during the quarter, particularly pharma, due in large part to our investments in data analytics. In addition, our airports reporting segment rebounded robustly as advertisers tapped into our dynamic platform to target millions of consumers on the move. And we saw continued strength in several markets in our Europe North segment, including in Belgium and the UK. At the heart of our strategy, we remain committed to becoming a visual media powerhouse by understanding our customers' needs, strengthening our digital capabilities, and securely tapping into the right kinds of data to help our clients plan, measure, and optimize their campaigns. We continue to believe this is elevating our role within the advertising ecosystem and increasing the range of advertisers we can pursue. In a first for our industry, we recently entered into several partnerships aimed at integrating our radar data platform with best in class data clean room or DCR applications and services to enable brands to utilize first party data matching for out of home in the US. The marketers that leverage DCRs and the budgets that fund these first party data driven programs typically are separate from out of home budgets. And many users of VCRs are not traditional buyers of out of home. We believe these integrations will open more doors for us with digital first brands by allowing them to leverage our scale and creative impact to run the most relevant ads and understand and analyze audience behaviors, all in a privacy conscious and secure manner. Since our last call, we also took several important steps with regard to our plan to optimize our portfolio. We closed on the sale of Italy on May 31st, and we expect to close on the sale of Spain in 2024 upon satisfaction of regulatory approval and other customary closing conditions. We also entered into exclusive discussions to sell our business in France and are aiming to complete the proposed transaction in Q4 2023, subject to an information and consultation process with Clear Channel France's Employee Works Council, execution of a share purchase agreement and the satisfaction of customary closing conditions. We were able to move forward with these agreements during a difficult environment for transactions, including tightened credit markets and the increased cost of financing. I'd like to thank our team and advisors for their diligence and hard work in executing on our business sales efforts. We expect the sales of our businesses in Switzerland and Italy as well as the anticipated sale of our business in Spain will generate approximately $175 million in gross total proceeds if and when completed. These transactions, together with France, will enable us to exit markets that have historically demonstrated a greater degree of volatility in our portfolio, which we believe will improve our risk profile and elevate our ability to drive positive cash flow. Consider that our remaining European businesses, encompassing our Europe North segment, on a trailing 12-month basis as of June 30, 2023, delivered revenue of $577 million, segment adjusted EBITDA of $102 million, and invested $34 million in CapEx. Consistent with the vision we laid out in our Investor Day last September, the European markets, which currently comprise our Europe North segment, have delivered higher margins and better financial metrics overall, have a higher degree of digital penetration, and have less volatility than the businesses in our Europe South segment. And importantly, we believe Europe North is in a stronger position to meet its own cash needs. Our board is continuing to conduct its review of strategic alternatives for our remaining businesses in Europe, as well as evaluating a range of other strategic opportunities to enhance value. We remain focused on delivering profitable growth, strengthening our balance sheet, and further demonstrating the operating leverage of our model. In addition, we intend to meaningfully restructure our corporate expense as our footprint simplifies. Now turning to our outlook. Looking ahead, our visibility is somewhat reduced, but we are not seeing an uptick in cancellations, and we remain within our annual financial guidance ranges after adjusting for sold businesses. However, we did tighten the high end of our guidance range. We're closely monitoring business trends and reducing costs and capex as appropriate, while operating in a disciplined manner as we execute on our strategic plan. There were, in fact, benefits from this cost discipline in our Q2 results. Brian will go through the guidance in detail, and as you might have seen in the earnings release, we are expanding our guidance by providing revenue guidance for America, airports, and Europe North for the third quarter and fiscal year, in addition to the consolidated guidance we have provided in the past. In our America segment, We started to see the market softening in June, resulting in a slightly lower Q2. This trend has continued into the third quarter and is mostly national and includes media and entertainment, auto, and technology. This is disappointing given the strong start of the year we had with our upfront, but what we are hearing from certain advertisers and agencies is that some brands are pausing with an intention to spend in the fourth quarter. So we remain optimistic. As anticipated, our airports business rebounded strongly, and we're seeing continued momentum with the potential for revenue to grow at an even faster rate in the third quarter as compared to the prior year than it did in the second quarter. In Europe North currently, we are seeing continued strength in the UK, our largest market, driven in part by the strength of our digital footprint, somewhat offset by tougher comps in certain markets due to the timing of the COVID-19 rebound last year. As we execute our plan, we are keeping a close eye on advertiser sentiment while operating in a disciplined manner.