Clear Channel Outdoor - Earnings Call - Q1 2025

Executive Summary

• Q1 delivered low-single-digit growth: revenue rose 2.2% to $334.2M, in line with guidance; Adjusted EBITDA fell 12.5% to $79.3M on lower Airports rent abatements and early ramp costs on the new MTA roadside contract, while loss from continuing ops improved to $(55.3)M.
• Versus S&P Global consensus, revenue missed ($334.2M vs $337.2M*) and EBITDA came in below consensus ($79.3M vs $88.3M*); Street EPS consensus was -$0.14*, but the company did not disclose EPS, focusing instead on loss from continuing ops and AFFO (AFFO was $(22.9)M).
• Guidance: Q2 revenue $393–$408M (4–8% YoY); full-year 2025 ranges maintained for revenue/Adj. EBITDA, with improved loss from continuing ops to $(70)–$(60)M (from $(105)–$(95)M) and higher AFFO to $80–$90M (from $73–$83M).
• Strategic actions/catalysts: closed Europe-North sale ($625M), divested Mexico/Peru/Chile, prepaid $375M CCIBV term loan, repurchased ~$120M face of 2028/2029 notes; management cites ~$37M annualized interest savings and strong 2025 booking visibility (>85% of Q2 revenue guidance already booked).

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

• What Went Well

  • Americas and Airports both grew revenue in Q1; Americas +1.8% to $254.2M (digital +6.4% to $89.6M), Airports +4.0% to $80.0M (digital +15.6% to $49.3M), aided by Super Bowl LIX in New Orleans.
  • Balance sheet progress: prepaid $375M CCIBV term loan at 3/31 and repurchased $120M of 2028/2029 notes in April; management expects ~$37M reduction in annualized interest expense, supporting AFFO growth.
  • Corporate expense down 33.8% YoY to $19.8M, aided by $9.9M insurance recovery; management reiterated ~$35M annual corporate expense elimination and sees further opportunity.

• What Went Wrong

  • Adjusted EBITDA declined 12.5% YoY to $79.3M, with Airports segment adjusted EBITDA down 25% amid normalization of rent abatements, and Americas margins pressured by higher site lease expense from the MTA contract ramp.
  • Direct operating and SG&A up 8.3% YoY to $232.2M; Americas site lease expense +6.6% to $88.3M and Airports site lease +16.4% to $51.2M as abatements rolled off.
  • AFFO was $(22.9)M vs $(12.8)M a year ago as lower Airports relief and ramp investments outweighed modest revenue growth; management still guides to FY25 AFFO $80–$90M on lower interest expense.

Transcript

Speaker 4

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.

Speaker 7

Good morning, and thank you for joining our call. On the call today are Scott Wells, our CEO, and David Sailer, our CFO. They will provide an overview of the 2025 first quarter operating performance of Clear Channel Outdoor Holdings. 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 5, 2025, for Mexico, Chile, and Peru, and March 31, 2025, for Europe North.

Additionally, the business in Spain was classified as discontinued operations in 2023. The consolidated results include the America and airport segment 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 1, 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.

Speaker 2

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 U.S. declined, largely driven by France. Further, if you look at the U.S. out-of-home market in prior non-pandemic downturns, you see the U.S. market's resilience clearly. For instance, in the 1991 and 2001 downturns in the U.S., 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. That is why we are confident in our company. Now we will 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 was not 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 CCI BV 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 and 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 have 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% 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've 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 % 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 a 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.

Speaker 3

Thanks, Scott. Please see slide five for an overview of our results. The amounts I refer to are for the first quarter of 2025, and the % changes are first quarter 2025 compared to the first quarter of 2024, unless otherwise noted. Consolidated revenue for the quarter was $334 million, a 2.2% increase, which was in line with our guidance. Loss from continuing operations was $55 million. Adjusted EBITDA for the quarter was $79 million, down 12.5%, driven in part by the expected decline in our airports rate of maintenance and the planned ramp-up in the MTA roadside billboard contract. AFFO was negative $23 million within our expectations. On to slide six for the America segment first quarter results. American revenue was $254 million, up 1.8%, in line with guidance.

The increase was primarily driven by the MTA roadside billboard contract, with digital revenue up 6.4%, local sales up 2.2%, and national sales up 1% on a comparable basis. This is the 16th consecutive quarter local has grown year over year. Segment-adjusted EBITDA was $88 million, down 8% as expected, with a segment-adjusted EBITDA margin of 34.6%, driven by the increase in site lease expense primarily related to the MTA contract and challenging revenue comps in February, as Scott mentioned. Please see slide seven for a review of the first quarter results for airports. Airports' revenue was $80 million, up 4%, also in line with guidance. The increase was driven by a 20% increase in national sales, partially offset by a 16.4% decline in local sales on a comparable basis. Digital remains an important driver and was up 15.6%.

Airports did benefit from the Super Bowl, which was held in New Orleans this year. Segment-adjusted EBITDA was $14 million, down 25%, with a segment-adjusted EBITDA margin of 17.9%. As we have talked about before, the decline is largely attributable to lower rent abatements. Moving on to slide eight. CapEx totaled $13 million in the first quarter, a 17% increase. Now on to slide nine. We ended the quarter with strong liquidity of $568 million, which includes $401 million of cash and $166 million available under the revolvers. This includes the proceeds from the sales of our international businesses. The cash balance also reflects the prepayment of the $375 million CCI BV term loans in full. It does not reflect potential proceeds from Spain or Brazil.

As Scott mentioned, we repurchased approximately $120 million of bonds for approximately $100 million in cash on the open market in April, and we will look to continue to capture attractive discounts going forward. We have reduced our annualized interest expense to $381 million, saving $37 million. Now on to slide ten in our guidance for the second quarter and the full year of 2025. For the second quarter, we expect our consolidated revenue to be within $393 million-$408 million, representing a 4%-8% increase over the same period in the prior year. As you can see, this is a meaningful improvement over the first quarter. We expect America revenue to be within $302 million-$312 million, and airports' revenue is expected to be within $91 million-$96 million.

As Scott mentioned, we are confirming our full-year guidance provided in February for revenue and adjusted EBITDA, and we are increasing full-year AFFO guidance to be within $80 million-$90 million, representing an increase of 36% to 54% over the prior year and reflecting lower interest expense related to the bond repurchases we conducted in April. Additionally, we anticipate having cash interest payment obligations of $402 million in 2025 and $381 million in 2026. This guidance has been updated to reflect the prepayment of the CCI BV term loans and the repurchase of bonds in April and does not assume that we repay, refinance, or incur additional debt. Let me turn the call back to Scott.

Speaker 2

Thanks, Dave. I know we've reiterated this a couple of times, but I can't emphasize enough that Q1 came in as we expected, and we have seen nothing in the marketplace to date that causes us to change our guidance for the year. This is not to say that we're ignoring the headlines and sentiment in the macroeconomy. We are absolutely planning for contingencies and will pivot should the facts on the ground change. We believe this is a good environment for us to gain media share, and we believe our medium, coupled with the sophisticated data analytics and selling work we've been pursuing, is gaining traction. We are excited about our transition into a newly U.S.-focused business and the opportunities that are emerging across our company and our industry. Our focus is on driving the performance of our higher-margin U.S.

assets, including continuing to broaden our revenue streams while reducing our corporate expenses. We expect to deliver mid-single-digit growth in consolidated revenue and adjusted EBITDA this year, with significant compound growth in AFFO. If you take our guidance for 2025, apply a reasonable roll forward to AFFO in 2026 for interest savings from further debt reduction and growth in adjusted EBITDA, and look at our current market valuation, we believe CCO is a big opportunity. We are committed to delivering on this opportunity for our shareholders. We have a very bright future, and I would like to thank our company-wide team for their continued contributions to our success as we move to the next stage of our plan and pursue value creation for our investors. Let me turn over the call to the operator.

Speaker 4

Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing star one. Once again, that's star one to be placed into question queue. Our first question today is coming from Cameron McVeigh from Morgan Stanley. Your line is now live.

Speaker 1

Thanks. Good morning.

Speaker 2

Morning, Cameron.

Speaker 1

Morning, guys. I was curious if you could touch further on maybe just your visibility levels into the back half of the year and how that might be trending on a national versus local basis. Secondly, I wanted to ask where you're seeing further opportunities for some of these corporate expense reductions. Thanks.

Speaker 2

Thanks, Cameron. I think we aim to address the first one in our script, but what I'd tell you is this is a business that always has pretty good visibility. I mean, I think we described this most quarters, and we tried to dimensionalize it a little bit more given the environment. The things that I would call out that are giving us a lot of confidence as the year ramps, in addition to what I said in the script, which was quite a lot. I will mention San Francisco again because we suffered with that in 2023, and I think it is going to be a real help to us this year. It is not just San Francisco. We are seeing good progress in a lot of markets this year. As we look across verticals, we think media and entertainment is going to be solid.

We are seeing auto insurance coming back to our medium, and that is a very welcome development. We continue to develop our pharma profile. The way I'd characterize it is that as a proportion to guidance, we're modestly ahead of where we would typically be this time of year, but not wildly so. The pipeline is strong across a number of those fronts. Both myself and our CRO, Bob McCuin, have been talking to our largest advertisers. While everybody is paying attention to the macro, we're feeling good about people's commitment to out-of-home as part of their media mix. I think it's because of a number of the things that I mentioned in the script. Hopefully that gives you a sense.

Not really going to characterize national versus local in any detail other than just to say that both are looking positive on the balance of the year. In terms of opportunity for cost reduction, we are going to have transition services agreements for quite some time that are going to require us to continue to keep higher levels of a variety of services, everything from managing the financials to taxes to legal and compliance. There are a lot of things that are going to continue as those things wind down that should be something that helps us. As we have said before, as we get to the end of those TSAs, we are aiming to have a zero-based budget view that is comprehensive to everything in the U.S. This is not just corporate expenses. We are looking at everything that should give us some opportunity.

We're not really at a point that we're ready to give a target on that. I think that's something you should expect when we're together in September at our investor day. Great. That's helpful. Thanks, Scott.

Speaker 4

Thank you. Our next question today is coming from Daniel Osley from Wells Fargo. Your line is now live.

Speaker 2

Thank you. Good morning.

Speaker 1

Morning.

Speaker 2

I thought the forward-looking commentary was helpful and wanted to dig into that a little more. Can you speak to the typical cancellation terms you provide to advertisers, and does that differ between local and national advertisers? As a follow-up, does the low end of the guide compensate any weakness from a macro slowdown? Thank you. Okay. First off, on terms, that, of course, is a very involved question, and I'm going to give you a 50,000-foot answer on it. Our standard terms, cancellations are a 60-day notice period. That is our standard terms, and that's for printed. With digital, it varies, and it varies depending on whose paper you're on. Generally, in our space, there are cancellation terms that give us some decent visibility when things are shifting.

As I noted in the script, we're not seeing that at all in this current space. In terms of the low end of the guide, we did not attempt to give a sort of full fan of outcomes of all the possible things that could happen. The low end of our guide is based on what we're seeing right now. We have not—you would have seen a much broader range of guidance if we were trying to give a full view of what might possibly happen. Hopefully that addresses that question.

Speaker 4

That's helpful. Thank you. Thank you. Next question is coming from Avi Steiner from JPMorgan. Your line is now live.

Speaker 5

Thank you. Good morning. I've got a few questions here. Just maybe circling back on that last one. I'm curious because you did talk about past dislocations and outdoors performance. How do you think your asset base, which I think now is more digital, might behave now versus those historical periods? And then I've got a few more. Thank you.

Speaker 2

Sure. I mean, I think there is no question that being more digital would give us—if you pull the camera way back, Avi, I know you know this—outdoor was always seen as being kind of last to go into a dislocation and last to come out because of the timeline associated with our inventory. With digital, that window is, I think, a little different. I do not think we have had a normal dislocation since more than a quarter of the revenue has been digital. The honest answer is we do not know. I think the thing that we saw in COVID that is notable is we did see digital come down first, but it came back way faster than the printed.

Particularly, the automated verticals really showed, or the automated customers, the ones coming through programmatically in other automated ways, showed the closest tracking to the sort of market sentiment. We are not at all observing anything in that space right now. I mean, we thought long and hard about taking as positive a view as we did on our call, but we're doing it from a place of very strong data and a number of factors that I've enumerated in earlier answers in the script that give us that confidence.

Speaker 5

Appreciate that very much and appreciate the Q2 acceleration and the reiteration of guide. I want to approach it from maybe the expense side if I could. How should we think about site lease expenses as we roll through the year? Maybe the better question is if you can give us a flavor, a sense of margin cadence as we move through the year, please.

Speaker 2

From a site lease standpoint, I think it's everything we've been talking about in the past. If I talk about it for airports, I mean, we've mentioned this probably numerous times. We're obviously not going to get the relief that we've gotten in the last several years. I mean, that fund has definitely is complete. So the margins will be different for airports. I mean, we were in the 20s. I mean, I think the first quarter of last year for airports, we were close to 25%, and that was really driven. I was on good performance of the business, which we're still seeing for airports, which is great, but you're not going to get that extra from site lease relief that we've gotten from COVID.

I think it's going to go back to what we've been talking about from an airport standpoint, around 20%, which is historically higher than it was prior to COVID. That business has really performed. The top line of that business has really increased the margins of that business. That's been really solid. I'd also say for both segments, in the first quarter, the margins are always going to be lower. It's just the media industry. There's less ad sales in the first quarter as it is second or fourth quarter. That's going to drive your margins as well. For America, I mean, the biggest one we've talked about is really the MTA contract, which, look, that contract is going to be great for the business.

It's just in the early stages of the contract, and we've mentioned this before, that contract's going to ramp, and that's going to help us as we get down the road. That has a little bit of effect on our margins in the short term and especially in the first quarter.

Speaker 5

Appreciate that very much. Maybe sticking with you if I can, two questions around the debt. Can you remind us what gave you the flexibility to buy back senior versus secured? Can you speak to why you left that debt outstanding as opposed to retiring those funds?

Speaker 2

Sure. I mean, look, it really comes down to where we're going to get the best yield as we're looking at our capital structure. Look, with the transactions moving forward, I mean, it's great for the business to see the liquidity that we have. I mean, at the end of the first quarter, cash on the balance sheet is $400 million. Liquidity is in excess of $550 million. When we're looking at our capital structure, we're really looking at what is the best yield, what would give us the greatest discount as we're looking at our capital structure. For me, it's just great to see that we're bringing down our debt. To pay down the BV notes with the proceeds from Europe, $375 million. In addition to that, paying down another $120 million of the bonds, I think, is really fantastic.

As far as the reason we're able to do that is really just the reinvestment provisions in our debt agreements allow us an 18-month reinvestment period to go after the debt. That's really how that played out.

Speaker 5

Okay. One very last one, if I can. I think you teased everyone by saying, and I'm trying to quote you here, "Substantial interest from potential counterparties." I do not know if you can or want to frame up maybe some of the creative things you're looking at and how that might help drive valuation and help the company deliver. Thank you all for the time.

Speaker 2

Thanks, Avi. Yeah, I know you're curious about this one. We have been pleased with the affirmation of what we perceived to be the assets we were bringing, which is that we're a good operator with very strong assets. We've gotten validation on that by the interest that we've seen, and it is just way too early to talk about any specific resulting opportunities, but we're encouraged.

Speaker 5

Thank you all.

Speaker 4

Thank you. Next question is coming from Lance Vitale from TD Cowen. Line is now live.

Speaker 0

Thanks, guys. At both America and airport, it looks like the static or the print revenues were actually down a little bit year on year. I'm wondering, is that evidence that digital is to some extent cannibalizing the print revenue, or is that the wrong conclusion? Maybe more specifically, do you expect print revenue to return to growth in either the second quarter or the second half of the year? Thanks.

Speaker 2

Hey, Lance, I think every quarter there's some variant of this question, and it is just idiosyncratic. I would expect print will be a grower over the course of the full year. I think we had some campaign unique drivers in it. I am not at all in a place where I am thinking print is imperiled by digital at all. They are a little bit of different use cases.

Speaker 0

Thanks.

Speaker 4

Thank you. Next question today is coming from Aaron Watts from Deutsche Bank. Your line is now live.

Speaker 6

Hey, everyone. Thanks for having me on. Just two questions. First, a clarifier on your America growth. Curious what the impact is of the new MTA contract on the 1Q growth of 1.8% and the 2Q guidance where you're calling for 48% growth. Just trying to get a sense of the underlying market strength as you move from 1Q into 2Q.

Speaker 2

Great. I think we dimensionalized the MTA as a couple of points on the full year, and I think that's a reasonable thing overall. I wouldn't draw a lot of conclusions about market strength in Q1 looking at our numbers because of the dynamics we called out in February because that was a pretty meaningful difference, the extra day last year plus the Super Bowl. I think the point we were trying to make about where April or, excuse me, where March and January were in the script is the more relevant.