Clear Channel Outdoor - Earnings Call - Q1 2021

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by. Welcome to the Clear Channel Outdoor Holdings, Inc. First Quarter twenty twenty one Earnings Conference Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session.

Please note this call may be recorded. And I will now turn the conference over to your host Eileen McLaughlin, Vice President of Investor Relations. Please go ahead.

Speaker 1

Good morning and thank you for joining Clear Channel Outdoor Holdings twenty twenty one First Quarter Earnings Call. On the call today are William Eccleshare, Chief Executive Officer of Clear Channel Outdoor Holdings Inc. And Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings Inc, who will provide an overview of the first quarter twenty twenty one operating performance of Clear Channel Outdoor Holdings Inc. And Clear Channel International BV. After an introduction and a review of our results, we'll open up the line for questions.

And Scott Wells, Chief Executive Officer of Clear Channel Outdoor Americas will participate in the Q and A portion of the call. Before we begin, I'd like to remind everyone that this conference call includes forward looking statements. These statements include management's expectations, beliefs and projections about performance and represents management's current beliefs. There can be no assurance that management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations. Please review the statements of risk contained in our earnings press release and filings with the SEC.

During today's call, we will provide certain performance measures that do not conform to Generally Accepted Accounting Principles. We've provided schedules that reconcile these non GAAP measures with our reported results on a GAAP basis as part of the earnings press release and the earnings conference call presentation, which can be found in the Financials section of our website investor.clearchannel.com. Please note that our earnings release and the slide presentation are also available on our website and are integral to our earnings conference call. They provide a detailed breakdown of foreign exchange and non cash compensation expense items as well as segment revenue and adjusted EBITDA among other important information. For that reason, we ask that you view each slide as William and Brian comment on them.

Also, please note that the information provided on this call speaks only to management's views as of today, 05/10/2021 and may no longer be accurate at the time of a replay. With that, please turn to Page three in the presentation and I will now turn the call over to William Eccleshare.

Speaker 2

Good morning, everyone, and thank you for taking the time to join today's call. During the first quarter, we continued to execute on our strategic plan with the goal of maximizing our near term performance, while strengthening our ability to capture an increasing amount of advertising dollars as the global recovery takes hold. Our first quarter revenue results were in line with the guidance we previously provided and for our American segment reflected a tough comparison against our strong performance in the first three months of twenty twenty, which was only minimally impacted by COVID-nineteen. We delivered consolidated revenue of $371,000,000 down 32% compared to the prior year excluding China and FX. Brian will walk you through the details of our first quarter performance following my remarks.

Looking ahead, we remain encouraged by the progress being made with regard to vaccination process and the increasing levels of mobility across many of our markets as well as the positive sentiment we are hearing among advertisers. As expected, we are now seeing our business return to year over year revenue growth through the balance of the year driven by the rebound in several markets. Most important, as a result of the strategic investments we are making in our business, we believe we are now in a stronger position to drive revenue growth as the global recovery gains traction. These investments are primarily centered strengthening our ability to monetize our growing digital platform as well as our print assets and elevate our value proposition amongst the broader universe of advertisers. Specifically, we continue to expand and integrate our RADAR suite of data analytics products into our portfolio while strategically increasing our presence in the programmatic space.

We continue to deliver a greater and more valuable set of actionable insights to advertisers, while emphasizing selling creative ideas targeting specific audiences. Put another way, we are broadening our discussions with clients beyond just the locations of our outdoor footprint with the value of specific audiences we reach with these assets. The pandemic has provided us the ability to demonstrate the usefulness of our data as consumer journeys change, agencies and brands seek to reach them in a seamless manner. As we focus on strengthening our ability to drive revenue growth, we have also remained diligent in managing our costs and cash flow. Brian will provide an update on our cost savings initiatives.

Now let me provide a brief update on each of our business segments beginning with Americas. Based on the information we have, for the second quarter, we expect Americas revenue to be between $265,000,000 and $275,000,000 with adjusted EBITDA margin improving sequentially from the first quarter. Entering May, we are seeing a notable uptick in bookings as advertisers become more comfortable with the prospects for a more sustained opening of the economy as the vaccination rates improve. Based on our data, we can see that audiences are increasingly out and about as the recovery unfolds. But there remains some lag between emerging mobility patterns and ad purchasing.

We primarily attribute this to the fact that some key ad categories such as amusements and restaurants remain challenged due to capacity restrictions, but we believe they will pick up as the year progresses and restrictions are lifted. Further, while our Transit business is seeing some improvement, it continues to lag in the recovery process, which is weighing on our performance. Comprised primarily of airports, this business is well positioned to benefit as travel volume increases. Looking ahead, we are continuing to see an increase in the number and value of RFPs. Categories showing particular strength include beverages, insurance and business services.

We're also beginning to see an upturn in theatrical in the current quarter, which is a welcome sign related to the progress of the opening of the economy. An example of a big opportunity centered on maximizing the opening of the economy is reflected in our recently announced partnership with Resorts World Las Vegas. In conjunction with the opening of the resort this summer and the return of convention activity, we launched three full motion digital out of home displays offering advertisers premium visibility on the Vegas Strip. They include the latest in cutting edge digital signage and represent one of the largest exterior LED building displays in The U. S, delivering over 135,000 square feet of digital signage.

With regard to our technology investments, we added 14 new digital billboards in the first quarter, giving us a total of more than 1,400 digital billboards across The United States. We also continue to strengthen our RADAR platform through partnerships aimed at further improving our data analytics and measuring the impact of our assets on consumer decision making. We have strengthened our leading audience attribution solution, RADAR Proof, by partnering with Keshava, the leading real time data solutions company for omnichannel attribution and measurement. Our innovative combined offering helps brands better understand out of home advertising's impact on key metrics such as user engagement, website visits and app downloads. This is the kind of compelling data that is enabling us to demonstrate the power of our platform in influencing consumers on the move.

We're also continuing to make notable progress in the programmatic space. Revenue from programmatic increased year over year in the first quarter, albeit off a small base. Through integration with multiple SSPs, our digital adafoam ad units are increasingly accessible to digital buyers via the same buy side platforms that they utilize to spend their considerable digital budget. And while it's still early in our programmatic expansion, the progress we're making bodes well for the future. Turning to our business in Europe, based on the information we have today, we expect second quarter segment revenue to be between 200,000,000 and $220,000,000 excluding the impact of foreign exchange.

As in The Americas, the pace of recovery varies across Europe, driven by differing rates of vaccination and variance in attitude to the virus in different parts of the continent. While some of our European markets are picking up momentum in terms of opening up, we're also continuing to see volatility with activity differing from country to country. In our largest market, France, the French government instituted additional mobility restrictions at the March following an increase in virus cases and concerns over new variants, delaying the onset of the recovery to the middle of the second quarter. Restrictions have started to ease with all schools now open and nonessential retail due to reopen on May 19. Meanwhile, we are continuing to see promising signs in some of our other markets, particularly in The UK, our second largest market, where the Phase three opening is well underway supported by a countrywide vaccination rate exceeding fifty percent.

Over the last six weeks, our UK business generated bookings ahead of the comparable period in 2019, as we benefit from pent up demand among advertisers. Our UK business continued to benefit from the premium locations of our roadside inventory as well as the widespread scale and audience reach of our digital networks. I'm proud to also note that our U. K. Team was recently awarded Commercial Team of the Year at the coveted Campaign Media Awards.

The judges recognized Clear Channel's outstanding performance linked to proactive programs focused on supporting advertisers through the unprecedented challenges presented by the pandemic. Looking at the rest of Europe, other countries that are progressing well in terms of opening up include Switzerland and Spain. As with The UK, we're seeing advertising spend recovering in these markets as infection rates drop and restrictions are eased. The overall sentiment among European advertisers is very positive, reflecting pent up demand and the need to get in front of consumers. As with the rebound we started to see in the third quarter of last year, following the easing of restrictions, which proved to be temporary, we believe the ad market will rebound again as restrictions are waived in additional markets in the months ahead.

Our digital footprint continues to expand in Europe. We added three fifty five digital displays in the first quarter for a total of over 16,500 screens now live. Supporting these assets, our RADAR rollout continues to receive positive customer traction in Spain and The UK. We're also testing RADAR in Sweden ahead of a launch in the current quarter with additional launches on track thereafter in France and Belgium. We're continuing to roll out our programmatic offering in Europe.

We recently launched a branded programmatic proposition called Clear Channel Launchpad, which will serve as a customer gateway connecting our premium digital out of home inventory to SSDs and digital buying platforms, bringing out of home into the omnichannel buying ecosystem. Clear Channel Launchpad is now live in The UK, Switzerland, Spain, Finland and The Netherlands with plans underway to introduce it across France, Italy, Belgium and Scandinavia. Similar to The Americas, our programmatic platform in Europe will build over time, simplifying the buying process and providing us with an important avenue to leverage our scale and technology to target new advertising partners. So in summary, we remain committed to executing on our strategy to expand the revenue potential of our global portfolio and optimize our ability to take full advantage of the economic recovery. We're now seeing a return to year on year revenue growth in the second quarter with indicators pointing to continued improvement in advertiser demand as the year progresses.

Now I'd like to turn it over to Brian to discuss our first quarter twenty twenty one financial results.

Speaker 3

Thank you, William. Good morning, everyone, and thank you for joining our call. As William mentioned, as expected, the quarter has been challenging due to the impact of COVID-nineteen on our business as well as tough comparisons against our strong Q1 twenty twenty performance in Americas. However, we are beginning to see a rebound in many of our key markets. We aren't back to 2019 levels, but it's certainly nice to see the improvement.

We are also continuing to work on reducing costs and addressing our capital structure while investing in our business so that we are in a stronger position as our business begins to benefit from the improving economic environment. Before discussing our results, I want to remind everyone that during our GAAP results discussions, I'll also talk about results adjusted for foreign exchange, a non GAAP measure. We believe this provides greater comparability when evaluating our performance. Additionally, we have expanded our disclosure to include more detail on Americas revenue including breaking out Transit revenue. We've also added disclosure on-site lease expenses in both the Americas and Europe segments.

Moving on to the results on slide four. In the first quarter, consolidated revenue decreased 32.7% to $371,000,000 Adjusting for foreign exchange, revenue was down 34.8%. If you exclude China and adjust for foreign exchange, the decline in revenue was 31.7. These results were in line with expectations. Consolidated consolidated net loss of $289,000,000 in Q1 of twenty twenty.

Consolidated adjusted EBITDA was negative $33,000,000 in 2021 as compared to consolidated adjusted EBITDA of $51,000,000 in Q1 of twenty twenty. Excluding FX, consolidated adjusted EBITDA was negative $27,000,000 in Q1 of twenty twenty one. Please turn to Slide five for a review of Americas' first quarter results. The Americas segment revenue was $212,000,000 in the first quarter of twenty twenty one, down 28.4% compared to the prior year with a decline in revenue across all of our products. National was down approximately 33% and local down approximately 25%.

Revenue continues to be under pressure as a result of the impact of COVID-nineteen, but also the decline was a bit higher than Q4 twenty twenty due to the tougher year over year comparisons. As I noted earlier, the Americas team delivered an exceptional quarter in 2020 with 8.5% revenue growth over the prior year. Direct operating and SG and A expenses were down 21.1% due in part to lower site lease expenses, which declined 22.6% to $83,000,000 related to lower revenue and renegotiated fixed site lease expense. Additionally, compensation costs declined due to cost savings initiatives and lower revenue. Segment adjusted EBITDA was $64,000,000 down 40.5% compared to the first quarter of last year, with an adjusted EBITDA margin of approximately 30%.

Please turn to slide six. As I just noted, we are now breaking out our Transit revenue which is primarily comprised of our airports business. Transit was down 61.5% and airports decreased 62.4% to 20,000,000 while billboard and other was down 20.7%. Please turn to slide seven for a bit more detail on billboard and others Q1 revenue performance. Rent continues to be a bit more resilient digital and was down 19.1% with digital down 24.2% from the first quarter of twenty twenty.

And on the slide eight, within transit print declined 52.5 and digital was down 72.8%. Next please turn to slide nine and a review of our performance in Europe in the first quarter. As a reminder, first quarter is proportionately the smallest quarter of the year given the seasonally low level of revenue. Europe revenue of $150,000,000 was down 29.4% and excluding foreign exchange revenue was down 35.2% in the first quarter. As expected, the extension of mobility restrictions continued to delay the rebound with the largest revenue reductions occurring in France, UK, Sweden and Spain.

Digital revenue was down 30 excluding the impact of foreign exchange. Adjusted direct operating and SG and A expense were down 11.6% compared to the first quarter of last year excluding the impact of foreign exchange. Both direct operating expenses and SG and A expenses decreased in most countries in which we operate with the largest decrease occurring in France, The UK and Sweden. The largest drivers of the decline in direct operating expenses was lower site lease expense which declined 10% to $93,000,000 after adjusting for foreign exchange. The decline was driven by lower revenue and the renegotiated site lease expense.

Additionally, SG and A expense was down due to lower compensation attributed to lower revenue, operating cost savings initiatives and government support and wage subsidies. Segment adjusted EBITDA was negative $62,000,000 after adjusting for foreign exchange. This compared to negative $14,000,000 in Q1 of twenty twenty. 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 or deducted from CCIBV's operating income and adjusted EBITDA. As discussed above, Europe and CCIBV revenue decreased $62,000,000 during the 2021 compared to the same period of 2020 to $150,000,000 After adjusting for a $12,000,000 impact from movement in foreign exchange rates, Europe and CCIBV revenue decreased $75,000,000 CCIBV operating loss was $100,000,000 in the first quarter twenty twenty one compared to $46,000,000 in the same period of 2020. Let's move on to Slide 10 and a quick review of Other, which includes Latin America. As a reminder, the prior year results include Clear Media, which was divested in April. Latin American revenue was $10,000,000 in the first quarter, down $9,000,000 compared to the same period last year due to the impact of COVID-nineteen.

Direct operating expense and SG and A from our Latin American business were $13,000,000 down $3,000,000 compared to the first quarter in the prior year due in part to lower revenue and cost savings initiatives. Latin America adjusted EBITDA was a negative $4,000,000 Moving on to Slide 11 and a review of capital expenditures. Capital expenditures totaled $18,000,000 in the first quarter, a decline of $18,000,000 compared to the prior year period as we continue to focus on preserving liquidity given the current operating conditions. Additionally, CapEx was also lower in part due to the sale of Clear Media. On to Slide 12, Clear Channel Outdoor's consolidated cash and cash equivalents totaled $642,000,000 as of 03/31/2021.

Our debt was $5,600,000,000 up slightly due to the refinancing of the senior notes. And cash paid for interest on the debt was $145,000,000 during the first quarter. Our weighted average cost of debt was 5.9% as of 03/31/2021. Moving on to Slide 13, as mentioned, we continue to focus on managing our cost base and strengthening our liquidity and financial flexibility. In April 2021, we revised the Europe portion of the international restructuring plan, we began in the third quarter of twenty twenty, primarily in response to the impact of COVID-nineteen.

We expect this plan to be substantially complete by the end of the 2023 and estimate that total charges for the Europe portion of the international restructuring plan, including $10,000,000 of charges already incurred, will be in a range of approximately $51,000,000 to $56,000,000 Substantially all charges related to this plan were or are expected to be severance benefits and related costs. We expect the Europe portion of the plan to result in a pretax annual cost savings in excess of $28,000,000 Additionally, we continue to work on negotiating fixed site lease savings and have achieved $23,000,000 in rent abatements in the first quarter on a consolidated basis. Also, we received European governmental support and wage subsidies in response to COVID-nineteen of $5,000,000 in the first quarter. Moving on to our financial flexibility initiatives, as previously announced, we successfully completed an offering of $1,000,000,000 of 7.5% senior notes due 2028. We used the net proceeds from the offering to redeem $940,000,000 of our 9.25% senior notes due 2024.

Additionally, last week, we entered into a second amendment to the senior secured credit agreement extending the suspension of the springing financial covenant through 12/31/2021 and further delaying the step down until 09/30/2022. Turning to Slide 14 and our guidance. For the second quarter of twenty twenty one, Americas segment revenue is expected to be in the range of $265 to $275,000,000 and adjusted EBITDA margin is expected to improve sequentially over the first quarter of twenty twenty one, while our Europe segment revenue is expected to be in the range of $200,000,000 to $220,000,000 excluding the impact of foreign exchange. Additionally, we expect cash interest payments of $216,000,000 in the last nine months of 2021 and $334,000,000 throughout 2022. We expect consolidated capital expenditures to be in the $155,000,000 to $165,000,000 range in 2021.

We are optimistic about our prospects and may look to accelerate CapEx spending as appropriate to the balance of the year commensurate with the slope of the recovery. We anticipate our consolidated revenue in the 2021 to reach nearly 90% of 2019 levels excluding China. The recovery is led primarily by our Americas billboard business and a number of countries in Europe including our UK roadside business. Lastly, we expect ending liquidity for 2021 including unrestricted cash and availability under the company's revolving credit facilities to be approximately $425,000,000 to $475,000,000 but that could vary based on timing of cash receipts and or payments. That concludes my formal remarks.

And now let me turn the call back over to William.

Speaker 2

Thank you, Brian. Looking ahead, we are encouraged by the pace of the vaccination process and the increasing levels of mobility that we're seeing across the majority of our footprint. In turn, interest among advertisers is returning and we are seeing booking activity exceeding twenty nineteen in several U. S. And European markets, which bodes well for the year ahead.

We remain focused on strategically investing in our technology, including expanding our digital platform and further strengthening our data analytics and programmatic resources with the aim of maximizing the potential of our digital board. As we elevate our ability to demonstrate the effectiveness of our assets and influence in consumer decision making and continue to make our inventory easier to buy, particularly among digital ad buyers, we will look to expand our revenue growth potential. As we invest in our technology, we will also continue to take steps to carefully manage our costs and preserve our liquidity as we navigate the evolving macroeconomic climate and focus on driving profitable growth over the long term. And now let me turn over the call to the operator for the Q and A session.

Speaker 4

Your first question comes from the line of Steven Cahill with Wells Fargo.

Speaker 5

I think you might be on mute, Steve.

Speaker 6

Sorry about that. Yep. So thanks a lot for the color. You talked about the pickup in RFPs and theatrical. Could you maybe give us a little bit of color on the Americas division?

How much revenue in this division these days? Is it the large urban signage, large urban areas, spectaculars, that sort of thing? Because I imagine that's where you're seeing a lot of this resurgence. So if you could maybe help put some color context around those large urban revenue areas and what sort of trends you're seeing, and maybe the same question, for Europe. And then, Brian, thanks for that financial detail.

Maybe if you could dive a little bit deeper into what the covenant holiday means. If you're ending liquidity of 04/25 to April, which I think I heard right, does that put you in compliance with the covenant? And does that include maybe some of your bank debt reduction or like revolver payback by the end of the year? Thanks.

Speaker 5

Brian, you want me to take the Spectaculars one first? Okay. Steve, the question about theatrical is a good one. And just to clarify, they do buy Spectaculars, but that's not the majority of what they buy. They actually are big users of our digital networks and buy relatively deep into the footprint.

And so I don't think we disclose how big the Spectacular business is, but it's in that bulletin and other that was disclosed. It is definitely showing signs coming back, but it's not just theatrical that's coming back. I hope that gives you a flavor for it.

Speaker 6

Maybe just in that context, large city or sort of large urban area ex transit starting to come back? We've seen that from some of our local TV companies.

Speaker 5

Yeah. I mean, I think it's it's it's a mixed bag across the country, but it definitely is. And and certainly, we look, you know, q two and beyond, we're we're definitely seeing that. I think the more you go south and the more you go to somewhat smaller locales, the more robust things are. I mean, think this will be

Speaker 3

a question we'll get, so

Speaker 5

I'll just answer it right now. We have about onethree of our markets not onethree of our revenue, but onethree of our markets trending to be ahead of 2019 this year. And I think overall, we're expecting a very strong second half and really second quarter and second half, particularly on the traditional side.

Speaker 2

And Steve, I think you asked about Europe as well. I mean, I hesitate to generalize about the recovery in Europe, because it really is very different country by country. If we were just talking about The UK, I think we'd be presenting a very positive picture as the bulk of the restrictions are being lifted almost by the day and we're seeing the recovery follow that very closely. In other European markets, the pandemic has taken longer to be cured as it were. Restrictions have remained in place for longer.

And so we haven't seen the speed of recovery that we're seeing in The UK. So it is a varied picture. What is consistent is that week by week lockdowns are being lifted and week by week as those lockdowns are lifted, the revenue comes back and comes back pretty strongly. But it's going to be happening during the second quarter that recovery is taking place. And so I think what I would say is if you average it out across Europe, April continued to be low.

May is certainly moving more strongly. And by June, I think we're expecting to see in pretty much all of our markets that recovery taking hold. But it's I think the I would think of the second quarter for Europe as transitional quarter and then looking to a strong sustained recovery into the second half as the vaccination rates increase.

Speaker 7

As I

Speaker 2

say, it is a there's no such thing as one Europe in this situation.

Speaker 3

And Steve, I'll jump in and answer the covenant question quickly. I think first I'd like to say we're pleased to deliver another amendment and it certainly reflects the continued support of our bank group. So happy with that. The second thing I'd note is this is a springing covenant. So it only applies if there's outstandings under our cash flow revolver, which today there is.

But what the second amendment means is there really is no financial covenant, which is a secured leverage test until the end of the year. And in return, we'll continue to maintain a minimum liquidity of $150,000,000 So it's a continuation of the first amendment with respect to the secured leverage test. That test, when it's in effect, is 7.6 times. There is a step down to 7.1x. And consistent with the delay in the application of the financial covenant, the step down has also been delayed.

And it's been delayed until 09/30/2022. So again, pleased to report the Second Amendment. And I think it's kind of based on how we feel the recovery is going, and we feel that we do have sufficient means to meet that test. You asked a question about the liquidity guidance and whether or not that's sufficient or what that reflects is kind of the way I took it. When we provide the liquidity guidance, it includes cash and availability.

So it doesn't really matter whether we pay down the revolver or not. It would be included whether it's availability in the revolver, cash on our balance sheet. We do believe it's sufficient. We've worked hard to build up that cash cushion. We have more visibility today than we did in the past.

But we also are very mindful of our liquidity position and we'll take additional measures if appropriate should we need to make any kind of changes on that front. So hopefully I addressed your question. Let me know if I didn't.

Speaker 6

No, that's great. Thank you.

Speaker 4

Your next question comes from Ben Swinburne with Morgan Stanley.

Speaker 8

Hi, good morning. Brian, I think that was your comment about second half of the year. I apologize if it was somebody else's reaching 90% of 2019 revenue adjusted for I just wonder if you could go back to that and just explain that again because that was a little bit quick. And also if you could give us a little bit of color on how you guys are thinking about the different parts of your portfolio in the context of that second half. And then I was just curious maybe for Scott on the programmatic side, what are your plans as you move through this year into next year in terms of building that channel out further, either technology investments and whether you're seeing advertisers really pick up even further interest in that channel, including kind of on the local side would be interesting.

Thanks a lot.

Speaker 3

Yes. So I'll talk a little bit about the revenue guidance comment, then I'll flip it over to Scott and William to talk about what they're seeing in their various markets. But the guidance provided was really to give some comfort based on the slope of the recovery that we're seeing in our business today. As to where we think the business can be at the end of the year with respect to revenue versus 2019 given what we see today and what we think will be happening over the second quarter and really the second half as we see recovery in the various parts of our business. So things could change.

But given what we're seeing today, we feel a strong recovery is in sight. And by the end of the year, we could be back up to ninety percent pre COVID levels, 2019 levels on the top line. So hopefully that gives some indication at a high level of what we're seeing today. And hopefully we'll see that recovery come to fruition. Scott, William, color on the operating units?

Speaker 5

Yes, the programmatic question, I'm happy to take The U. S. Portion of it and then William to the degree you want talk about the European, we can dive into that as well. So first off, programmatic is coming back very nicely. It is performing well, and it is performing ahead of 2019 pretty materially at this point.

It is a channel that we see advertisers having interest in more broadly. In terms of our plans, I think you will see us add at least one more SSP, which are sort of their supply side platforms. They're sort of the large scale distribution platforms that give you access to different DSPs, which are the demand side platforms. That's what the advertisers actually use. We currently have a pretty robust mix, but we're always looking to enhance that and we're always looking to add.

I think you're also going to see us building more and more capability in terms of how we're actually handling the content, side of things. So, there are investments that we're making in our content management system, and and other development we're working with along those lines in terms of making our toolset more robust and able to continue to scale nicely. As to the question on local, we have had a few local customers buy programmatically. It has not been the primary angle on our business. But I think as you see the demand side, some of the more mainstream demand side platforms coming online that do a lot of business at that level, I think you'll see us pick up more.

But that has not been the focal point so far. William, I don't know if there's anything you'd add on Europe.

Speaker 2

No, I'd only say I think I said right at the start of this year that the programmatic was going to be a key part of our agenda right across the company. And what Scott's been doing in The U. S, I think has been a model of growing our programmatic capabilities. As I said in the script earlier, we would have launched in five major European markets our branded programmatic product, which is now as I say in those five key markets initially, we call it Clear Channel Launchpad, which connects our premium digital inventory to SSPs and to digital platforms. And it's an important start.

Europe is a little bit behind the adopting programmatic at scale. But I am absolutely convinced that within the next two to three years, we'll see it taking a pretty significant share of our business. So it's an important step forward.

Speaker 5

Thanks everyone.

Speaker 4

Your next question comes from Lance Botanza with Cowen.

Speaker 7

Hi guys. Thanks for taking the questions. I have one for Brian and one for William. Maybe William we can start with, I found the country by country commentary, and you're very helpful. And I understand that the pace of the restrictions being lifted varies by country to country.

But what about the lag between return of audience and return of ad dollars? And generally, if I'm hearing you right, it sounds like you're not really seeing a lag this time around. Feels different than last fall. But did I get that right?

Speaker 2

It really depends, Lance, on how much digital inventory we have in each market. So in The UK, where over 60% of our revenues now comes from digital screens, the recovery is pretty much instant in terms of our revenue once restrictions are lifted. So once audiences are back on the street, advertisers want to reach them and we can get those straight up onto digital screens and then follow on soon after onto traditional inventory. In France, for instance, where we have significantly less digital inventory that recovery can take a little longer. Although I would say that if we look back into Q3 of last year, when restrictions were lifted in France, we did see revenue coming back pretty fast.

I mean, not as fast as we would with a stronger digital footprint, but I think that is the main variable. I think the other factor to look at is the clarity of the government's signaling of what their plans are in terms of loosening up restrictions. So I think in The UK, we benefited from a very clear roadmap of five weekly stages of the opening up. In Spain, it's been much less clear what the process was going to be. And in France, I think we would say, they took a long time before they reacted.

They have now reacted and we're now seeing infection rates go down, vaccination rates go up and restrictions being lifted. So as I say, I'm very optimistic about the direction of travel. I'm optimistic about the speed of recovery once restrictions are lifted, but it does vary a little Does that help?

Speaker 7

Yes, very much so. Thank you. And then Brian, just for you, do you does somebody still have 40,000,000 to $45,000,000 of LCs outstanding? And if so, presumably that is factored into the liquidity guide. In other words, that's a net against what you would otherwise be able to borrow on the revolver.

Is that right?

Speaker 3

That's correct. And I actually think we disclose what the availability, which would be the size of the revolver less any kind of commitments, would include LCs. I don't remember the exact amount. It may be a little higher than $25,000,000 But we are a big LC user. That is backed out because it's not available for liquidity.

So it would not be included in the liquidity number.

Speaker 7

Okay. Thanks guys.

Speaker 4

Your next question is from Stefan Bisson with Wolfe Research.

Speaker 9

Good morning. Thanks so much for the additional color today. Could you talk a bit about margins and how they should trend throughout the year and perhaps over the longer term for both Americas and Europe? Should we be targeting pre pandemic levels or is something changing the cost structure to push it one way or the other?

Speaker 3

I can take a stab at that and then William and Scott if you want to weigh in respectively. Look, think margins are coming back. In Americas, we talked about sequential improvement. We're a little early in the recovery in Europe to make that commitment for Q2. As the economies start to rebound, as Europe starts to kind of follow in and really get traction in the recovery, we would expect the margin improvement is there.

I mean this is a large fixed cost business, has a great deal of operating leverage, and we'll see that pull through as the recovery occurs. And if it's not in Q2 for Europe, we would expect it in the second half. The other part of your question about do we ever expect margins to hit pre COVID levels? Well, the business does change over time. And I think that answer is dependent upon a number of things.

We have some positives. We've taken out some costs in the business. We continue to take out costs in Europe. It will take a little longer there. But we are being very diligent, and we don't expect all these costs to come back.

On the other hand, the portfolio does change. If in the future we have more weight in transit or more weight in airports or more capital city contracts, have lower margins, that could change the overall margin profile. And we do have some of that business mix differential right now. And so I wouldn't expect that when revenues get back to 2019 levels, you should assume margins would be at the same point. It's going to reflect some of the underlying changes in the business.

But by and large, incremental dollars to this business will fall through. And we're encouraged that we're starting to see some of that. And again, I think through the rest of the year, we hope to deliver it. Scott, William, I don't know if you had any further color, but that's where I'd start.

Speaker 2

Scott, do want to make any comment for The U. S?

Speaker 5

I mean, think the only thing I'd just say is that the next several quarters are going to be lumpy, and that could go in both directions. And so, what's driving that is we're still in negotiations and still in approval processes on different relief programs, and we will start to see some snapbacks happen as relief that we got during worst of the crisis played through. And so it's probably not going to be a neat linear path over the next couple of quarters. But I think medium to long term, you will see a healthy margin profile reemerge.

Speaker 3

Scott, I'm glad you mentioned that. That's a very fair point. My comments on the longer term recovery was assuming all of this had unwound. I think you're right, the next few quarters due to the lumpiness of some of the deferrals and abatements, it could be you said, could be very lumpy. So thank you for that.

Speaker 2

Yes. So I would only add, I was going to use the lumpy word as well, I'm afraid, because it applies equally to Europe. It's pretty lumpy. The other point I would make for Europe, to echo Brian's point is, we have made it clear, we are going through some pretty significant cost reduction programs in Europe and in some specific European markets. As you'll know, with some of those European markets, those cost reduction programs can take time as you go through extensive negotiations.

So whilst we are very actively addressing some cost based challenges in Europe, the impact is not going to be instant. It's going to take some quarters before we really see that impacting margin.

Speaker 9

Great. Thanks so much for the color.

Speaker 4

Your next question comes from David Joyce with Barclays.

Speaker 10

Thank you. Was hoping you could provide some more color on the proportion of your advertisers and revenue that are coming from radar at this point. What portion of your footprint is enabled? And also, you linking with other to what degree are you linking with other media companies with that holistic omni channel buy program for your advertisers? Thanks.

Speaker 5

William, do you want me to take a run at this first? Yes. Yes. Sure. So in The U.

S, 100% of our footprint is radar enabled. And it it's very hard to actually answer your question because radar is not it's not something that the the client buys. It's a service that that goes alongside what they're buying. And so a client might use radar and many of our clients at this point are using radar to do their planning, but they might not do an attribution study. They might not sell any other media through our radar connect tool and might not embed our data.

On the other hand, advertisers might do all four of our radar products here in The U. S. So we don't really measure it by what percent of our revenue goes through it. And let me speak to the omni channel because I think there could be two ways to answer that question. I think thing one would be that we we do when we do radar studies, we do include analytics for all the out of home that's being used, not not just ours.

But I don't think that's necessarily what you meant by omnichannel. I think you're thinking of omnichannel DSPs, so a programmatic thought process, and you can clarify it for me when I give you this blurb as well. Omnichannel DSPs are relatively recent to out of home programmatic. They are absolutely a growth channel, and we are definitely seeing advertisers including out of home in their digital campaigns where they they might be buying other digital advertising products along with digital out of home. The the workspace for these omnichannel DSPs includes quick boxes where they can add, digital out of home alongside display ads or search or other things like that.

But that is still the minority of our programmatic revenue at this point. It's something that we think has huge promise, but it's an emerging channel. So hopefully that addressed your questions.

Speaker 10

Yes. Those comments were all just for The U. S, correct?

Speaker 5

Yes. That is all U. If

Speaker 2

you take Europe, RADAR, we launched RADAR in just The UK and Spain just last year. We are looking to roll out the product into other European markets later this year. But again, to Scott's point, we use it as a market indicator of audience and of the audience travel patterns. And so use it to demonstrate to our advertisers the audiences that they can reach through a collection or a network of boards or screens. But it doesn't relate to a specific advertiser campaign in general.

Speaker 10

Okay. Thanks. And a second question, if you could please clarify, when things normalize in 2022 or 2023,

Speaker 5

will the

Speaker 10

margins be higher due to your various cost cuts? Or will the revenue mix shifts differential make the margin comparisons a little more difficult from pre COVID?

Speaker 3

Yes. I don't think we know the answer to that. I think we are achieving cost savings, and we think some of those will stay. And obviously, as the business grows, we'll have to reevaluate it. And that is tailwind.

At the same time, we're made up of a portfolio of contracts. And we'll continue to go after profitable contracts, and that can shift over time. If we get into more transit, that could change the business mix. So I don't know that we know the answer. I think we'll continue to focus on improving margins the best we can.

But at the end of the day, we want to generate positive and incremental positive free cash flow. And we'll manage the portfolio as we think is accretive most accretive to shareholder value.

Speaker 10

Great. And if I could just understand better the renegotiated lease contracts, are those temporary abatements, temporary changes? Like do they come back with prior levels of revenue? How should we think about that cadence?

Speaker 3

Well, it's a mix. And I think you start with when COVID impact was the greatest, you started with deferring payments on everything and trigger negotiations. It's unprecedented times. Our counterparties largely realize that as well. And sometimes those deferrals, turn into abatement.

Sometimes there's government support behind it. Sometimes you're dealing with private landlords and it's more of a discussion and maybe it is a deferral and ultimately it will have to be paid out. But there's a wide spectrum of discussions, and these are ongoing. So I think that once we confirm that something is a permanent abatement, we disclose that. And everything else is a deferral.

If it hasn't been paid, some of those deferrals could flip into abatements. Some of those will be deferred and ultimately unwind as the recovery continues. So it's a mixed bag. And we do disclose separately the site lease abatements that we've gotten in the quarter and all of last year. And so hopefully, gives you some color on the site lease negotiations.

It's a big initiative. The operators have done a great job, and they'll continue to do what they can as long as the business is negatively impacted by COVID.

Speaker 10

Okay, great. Thank you very much.

Speaker 4

Your next question comes from Avi Steiner with JPMorgan.

Speaker 11

Thank you and good morning and thank you for squeezing me in. A quick few here. Domestic travel seems to be coming back based on TSA numbers. I'm curious how important is it for the company that business travel returns versus what seems like personal? And then if you could just remind us on the lag time on the airports business between higher levels of travel and revenue coming back to historical levels?

And then I've got a couple more. Thank you.

Speaker 5

Sure. Thanks, Avi. You're absolutely right. Travel is coming back nicely. The business travel is what historically the majority of airport advertising anchored on.

But as we've gone through the crisis, we've actually engaged a lot of advertisers who are not sort of B2B oriented. And so we're going through a bit of a portfolio mix shift. I think the way I'd answer your question is that it will definitely be important for us to have international travel in particular start to reemerge because international terminals tend to be some of your most premium inventory, whether for business or for consumer oriented products. Business travel as a whole, I don't think needs to get back to the same level that we had before COVID in order for it to be still a very robust audience and a robust opportunity. As far as the question on the lag, I think when you go back and look at last year and now that we're disclosing the information, might see this a little bit more clearly on transit.

We didn't see a precipitous fall off immediately. And it's because a lot of the airport contracts are a little bit longer term in orientation. And so you had a little bit of an unwind that happened. And that works in the other direction too, that you need to get advertisers to decide that they believe that the return of the audience is robust and then they need to commit in order to secure locations and secure their positions. We've never gone through anything like this or at least not in recent history.

I think nineeleven is probably the closest analogy, and it was pretty different in terms of the speed and, you know, how traffic rebounded and and how things work there. But we really so we really don't know what the lag is gonna be, but we expect that it will probably be, you know, multiple months. We definitely are seeing advertisers some of the strategic advertisers that really prioritize airports come back for the second half of this year. So I think our news is going to get a lot better as the year builds. But in terms of calling the ball on exactly when we're back run rate, I do think it will lag the roadside business by multiple months.

Speaker 11

Appreciate that color. Thank you. And then Brian, just on the liquidity comments, which were very helpful. Just for me beyond interest and CapEx, how do we think about working capital, some of these deferrals come back and any other movements in there and then restructuring, cash restructuring, please?

Speaker 3

Yes. That's one of the reasons why we kind of went out and gave a year end liquidity position because I do think we have some swings particularly in the deferrals. We've got our operators working very hard to defer those payments, convert those payments to permanent abatements. And then for liquidity purposes between now and kind of normalization, have to pick periods when they will hit. And so we thought it was important to kind of go out to the end of the year and provide some liquidity guidance.

And I think we feel given what we see today, we feel pretty good about that range. Restructuring charges, yes, look, I think we have a number of things going on. If I look at some of the cost savings initiatives, largely we have spent and we are benefiting from the restructuring initiatives that we've taken in The U. S, Latin America and a significant amount of the corporate. What will take a little longer is the European side and we've provided some data points on that.

And it really is a function of the countries that we operate in Europe going through the process there. But we do and we've actually revised the program to make it larger and more substantial. That will take a little bit longer, but I do think from a cash outflow perspective, since a lot of that cost is really severance related, they should be largely in line. Put another way, you won't have a huge amount go out day one and not receive that until the first quarter of twenty twenty three. They should be kind of matched funding from here on out.

We have some upfront costs, But for the most part they should kind of match going forward. So hopefully that's helpful on the working capital and restructuring side. Let me know if you have further questions.

Speaker 11

That's great. And maybe last one I haven't heard in a while, but I may have just missed it. Any update on the Los Angeles billboard market? Thought earlier in the year there were some new rules potentially coming out there. So any comments there?

Thank you for the time.

Speaker 5

Thanks, Savi. I'll take that one as well. The thing you might have read about was the City Planning Commission had put forth their response to some of the ordinance language that the city council had drafted. It's now back in the city council's land use committee and they are working on it. I would not hazard a guess as to when that political process will yield, but I do know that they're working on it.

It definitely got deprioritized during COVID. We had felt pretty bullish the early part of last year that things were going to move through. And I do think that the City Council is engaged and is very serious about getting an ordinance out that will work for the industry there, but we don't have a timeline that's concrete.

Speaker 11

Appreciate all the time. Thank you.

Speaker 5

Thanks.

Speaker 4

At this time there are no additional questions. I will turn it back over to William Eccleshare for his closing remarks.

Speaker 2

Thank you. And thank you everybody for joining the call and for supporting us during this period. I mean, I just want to end by saying, I think we will look back on the 2021 as the quarter where the business turned a corner, the pivot quarter, if you like, where we went back into growth and we are starting to see the real recovery from COVID-nineteen. It's clearly dependent upon some factors out of our control as whether there are kind of further COVID variants and how vaccine programs run out in different markets around the world. But all of the signs that we are seeing are truly encouraging around our businesses ability to bounce back from COVID.

And just picking up on some of the questions that we've had today, as those restrictions elated and as audiences come back into the streets, we do see that recovery coming. The lag varies market by market, dependent a bit on levels of digital inventory and a bit on specific circumstances. But as I say, Q2 is the key quarter for us as we turn that corner and look to the second half of the year to really demonstrate the business back into full growth. So thank you for your support. Thanks for the great questions.

And we look forward to talking in the coming weeks and months. Thanks very much.

Speaker 4

Thank you. This concludes today's conference call. You may now disconnect.