Clear Channel Outdoor Holdings, Inc.

Greetings, and welcome to the Clear Channel Outdoor Holdings Q1 2025 earnings conference call and webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over To your host, Eileen McLaughlin, Vice President, Investor Relations. Eileen, please go ahead.

Good morning, and thank you for joining our call. On the call today are Scott Wells, our CEO, and David Saylor, our CFO. They will provide an overview of the 2025 first quarter operating performance of Clear Channel Outdoor Holdings, Inc. We recommend you download the 2025 first quarter earnings presentation located in the financial information section of 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. Before we begin, I'd like to remind everyone that during this call, we will make forward-looking statements, including statements about the company's future financial and operational performance and the company's strategic goals, the out-of-home industry, and the economy. All forward-looking statements involve risks and uncertainties, that may be out of the company's control, including the macroeconomic environment. 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 earnings presentation. When reviewing our earnings presentation, it is important to note that as of December 31, 2024, we classified our Europe North segment and Latin American businesses as discontinued operations for all periods presented. The 2025 first quarter discontinued operations include sold businesses up until their sale date, February 5th, 2025, for Mexico, Chile, and Peru, and March 31st, 2025, for Europe North. Additionally, the business in Spain was classified as discontinued operations in 2023. The consolidated results include the America and airport segments and Singapore. Also, please note that the information provided on this call, including guidance, is based on information currently available to management and speaks only to management's views as of today, May 1st, 2025, and may no longer be accurate at the time of a replay. Please see 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 us today. We are excited to speak with you about our progress as a newly U.S.-focused business. As such, we're going to take a slightly different approach than we've typically taken on earnings calls and focus more on where we're going than on where we've been. We'll be happy to follow up and drill into the past, but today we're focused on talking about the future and why we're optimistic about it. Before we get to that, we know people have a lot of questions about tariffs and the possibility of a recession. We are not macro forecasters, but I want to register several key points relevant to this question. As for recession risk, we believe we provide cost-effective, accountable reach to brands in a world where that is increasingly hard to find. We are also making real strides in selling direct to large advertisers, partly on the back of our robust planning and attribution tools. We will provide more context on this and other initiatives at our investor day in September. We de-risked our portfolio. If you look at the COVID downturn, an extreme example, in 2020 and 2021, our European businesses declined substantially more than the Americas declined, largely driven by France. Further, if you look at the US out-of-home market in prior non-pandemic downturns, you see the US market's resilience clearly. For instance, in the 1991 and 2001 downturns in the US, you saw growth slow or modestly decline during the downturn, only to return to growth shortly thereafter. Whatever disruption may occur, we believe our risk is greatly reduced. We have begun to meaningfully reduce interest expense. This has been both the result of the prepayment of the CCI BV term loans and our open market repurchases of bonds. Collectively, this reduces our annualized interest by $37 million. We expect to continue to deploy proceeds from the asset sales or other available cash on hand to reduce debt in the most advantageous way, contributing to AFFO and cash flow growth as permitted under our debt agreements. As promised, we have successfully eliminated approximately 35 million of annual corporate expenses, and we expect we can take that further over the next couple of years. We expect to benefit notably from the recovery of San Francisco this year, our third largest market in America, where it was a substantial headwind in 2023, declining double digits and dropping from our second largest market to third. It is currently setting up to be a tailwind this year, with the city cleaning itself up and reemerging as a destination. We are seeing increased interest by national advertisers there, and AI is emerging as a new revenue vertical that is complementary to other tech budgets. We believe that this will likely play out to a decent degree, regardless of the macro environment, with bookings up double digits so far this year. Finally, this management team is battle-hardened on cost takeout. We have experience dating back to the dot-com bubble, as well as the great financial crisis and COVID, along with experience running a very leveraged company through a variety of environments. We have shown we can be agile adjusting to the environment. All that said, I'm pleased to say that at this point, we are not seeing cancellations or hearing about campaigns being scaled down. Our focus is on cash generation as measured by AFFO, and we are confirming the guidance ranges for revenue and adjusted EBITDA we provided in February, and increasing AFFO guidance to reflect debt repurchases. So that's why we are confident in our company. Now we'll briefly cover Q1 and go deeper into our future vision. For Q1, we delivered consolidated revenue growth of 2.2% in line with our guidance in what is always our smallest quarter. Our consolidated revenue growth was impacted by February, which had one less selling day and a Super Bowl that wasn't in one of our roadside markets. For January and March only, our Q1 revenue growth was twice that of the entire quarter. Also in Q1 and into April, we delivered. We signed and closed the sale of Mexico, Chile, and Peru. We signed the sale of our Europe North segment and closed it faster than we'd even anticipated. Note that our sales to date have amounted to approximately $745 million in purchase consideration. We prepaid the 375 million CCIBV term loans in full. We repurchased approximately $120 million in face value of bonds resulting in a guaranteed weighted average yield of approximately 14%. We launched the sale process for our business in Spain, which continues to perform well. Dave will go into more detail on the results, but let me reiterate that the first quarter was in line with our expectations. We are confirming our guidance for the full year, and we remain focused on positive cash generation, period. As for the future outlook, we believe that it is bright for out-of-home advertising in the U.S. in general, and Clear Channel in particular. Here's why. The simplification of our business is allowing us to reduce interest in corporate expenses. As those come down, we expect to be able to routinely reduce our debt, which is a priority. It is also allowing us to devote more energy to identify creative options to improve leverage using our strong operating and media assets. Since we announced our openness to pursue creative solutions last quarter, we've seen substantial interest from potential counterparties, Nothing to report here yet, but we are actively exploring options that could validate the strategic importance of our hard-to-replicate assets and accelerate our deleveraging efforts. As we have previously emphasized, our visibility into the year is good. We have the majority of our 2025 revenue guidance already booked and a strong pipeline in place for the balance of the year. Also, over 85 percent of the second quarter revenue guidance is in the books. Our direct outreach efforts to target verticals are yielding fruit. This is from a combination of radar analytics and domain-savvy salespeople and makes us more confident in our ability to grow these categories. In 2024, we successfully reduced customer churn due to the enhanced tools we put in place to focus our sales effort on vulnerable spots and from conscious efforts to proactively grow our best customers. We'll share more on this at our investor day, but we currently believe that this is a material opportunity on top of ordinary growth efforts. AI is one of the capabilities fueling that effort, and it is proving to be an asset across many parts of our business. For example, AI helped our inside sales team deliver double digit percent improvement in productivity. We are now actively deploying large language models on activities ranging from customer targeting to creative development. We believe that as these programs are implemented, They should provide tailwinds to our margins and our leading productivity in out of home. Also thinking about AI, we believe it is going to have a tendency to make many types of advertising more invasive for consumers, potentially leading to backlash. That likely means it will also be used to make ad blockers more powerful. We believe our presence in the physical world with physical context coupled with strong insights on aggregate audience delivery should help our medium capture greater share of ad budgets. When you put all this together, the path we've been describing of positive AFFO growth coupled with targeted investment in our business leading to reduction of leverage before we explore any creative solutions makes us very excited about the future. With that, I'll hand the call over to Dave. Thanks, Scott.