Clear Channel Outdoor - Earnings Call - Q2 2021

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by. Welcome to the Clear Channel Outdoor Holdings Inc. Second Quarter twenty twenty one Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

I'll now turn the conference over to your host, Eileen McLaughlin, Vice President, Investor Relations. Please go ahead.

Speaker 1

Good morning and thank you for joining Clear Channel Outdoor Holdings twenty twenty one second quarter earnings call. On the call today are William Eccleshare, Chief 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 second quarter twenty twenty one operating performance of Clear Channel Outdoor Holdings, Inc. International B.

V. 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 represent 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 these 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 provided schedules that reconcile these non GAAP measures with our reported results on a GAAP basis as part of our 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, segment revenue, adjusted EBITDA and adjusted corporate expenses, including the impact of share based compensation and restructuring charges 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, twenty nine, twenty twenty one, and may no longer be active 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. I'm pleased to report that we're seeing a substantial rebound in our business, not only in the second quarter, but into the balance of the year with strength in the top line and improved profitability. With advertisers returning, we believe we're in a stronger position to capitalize on the growth potential of our out of home platform, including continued investments in technology to drive growth in our higher margin markets, particularly in The Americas, while maintaining our financial flexibility and objective to delever the balance sheet and unlock shareholder value. With the business showing clear signs of recovery, I have decided that now is the right time to implement our succession plan and for me to transition from the operational leadership of the company. I'll be assuming the new role of Executive Vice Chairman starting 01/01/2022, and will be supporting the management transition and leading the strategic M and A activity in our ongoing efforts to optimize our portfolio.

I'm also delighted to announce that Scott Wells will take over as CEO while continuing in his current role as CEO of Clear Channel Outdoor Americas, and he will join me on the CCO board. Scott and I have worked together in a variety of roles since the day I started at Clear Channel when he was an operating partner at Bain Capital, our former PE sponsor. I know that many of you on this call to speak to Scott and he's the of our Americas business and are familiar with his deep knowledge of our business and the he and his team have delivered in the Americas division over the past seven years. Scott has outstanding previous experience and a proven track record in leading the Americas segment's technology and data driven transformation strategy, resulting in strong growth prior to the onset of COVID. Furthermore, during the pandemic, Scott and his team have moved quickly to stabilize the business cost and position our Americas business for the strong rebound that is now underway.

I greatly admire all that Scott has achieved, and I look forward to continuing to collaborate with him as we focus on maximizing the performance of the company in this next chapter in our history. Justin Cochrane, the current CEO of our Europe segment will continue in his role and will join these calls in the future to share the results from the Europe segment. I would also like to take this time to thank the incredible Clear Channel team for their dedication and hard work in managing through the most difficult business environment I've ever experienced. Their ability to adapt to the quickly changing marketplace has ensured that we are in the best possible position to accelerate our recovery by capitalizing on the increasing demand for our medium as consumers return to the street. Moving back now to the review of our business.

We delivered better than anticipated consolidated revenue of $531,000,000 in the second quarter, up 63% compared to the prior year excluding FX and China. Americas revenue was $272,000,000 up 36% at the high end of our guidance and Europe revenue was $247,000,000 or $224,000,000 excluding FX, up 109 percent, which exceeded our guidance. Encouragingly, we saw a steady improvement in our top line performance each month as the second quarter progressed. We achieved about 70% of 2019 revenue in April, 80% in May and 90% in June for our Americas and Europe segments combined, excluding FX. Moreover, we are continuing to see positive momentum build in our business as the current in the current quarter as the recovery takes shape across our footprint.

All of our business segments are growing well ahead of last year with some markets now beginning to either match or exceed twenty nineteen levels. As a result of the continued strong rebound we're seeing in our business, we're now increasing the revenue guidance for the second half of the year that we previously provided in our Q1 earnings call from nearly 90% to about 95% of twenty nineteen revenue, excluding FX in China. The recovery is across the board, led primarily by our digital roadside business. In short, business is back, and we are very excited about the trends we're seeing and our ability to capitalize on the recovery underway. During the COVID crisis, we continued to strategically invest in our business while aggressively addressing our cost structure.

We believe we are emerging from the COVID crisis with a stronger and more dynamic platform, better positioned to deliver a broader and more valuable mix of actionable insights to advertisers combined with even greater flexibility in delivering highly targeted campaigns at the right time and in the right place. These investments have energized our organization and have given our sales teams even stronger resources to present to new and returning advertisers. Now let me provide a brief update on each of our business segments, beginning with The Americas. Americas, based on the information we have for the third quarter, we expect Americas revenue to be between $315,000,000 and $325,000,000 with our segment adjusted EBITDA margin expected to return close to twenty nineteen levels. This would put our third quarter revenue performance for The Americas within a few percentage points of our top line performance in the third quarter of twenty nineteen.

In the third quarter, we are experiencing notable uptick in demand as momentum builds and advertisers recognize the breadth of the recovery underway and the need to rebuild their campaigns, refresh their brands and connect with consumers. The majority of our markets are showing considerable improvement, driven in large part by our digital business. We're now seeing a strong rebound in airports and in big cities such as LA and New York as well as in key verticals that had previously been negatively impacted by the pandemic, including theatrical, retail, and financial services. We're continuing to see some name brand advertisers return to the out of home market after having been gone for years. This renewed interest is due in part to their recognition of the advancements we've made in our technology, including our RADAR suite of solutions.

With regards to our technology investments, we deployed 26 new digital billboards in the second quarter, giving us a total of more than 1,500 digital billboards across The United. We also continue to strengthen our radar platform and programmatic solutions through the completion of multiple integrations with our strong base of partners. These partnerships further elevate our data analytics capabilities and our ability to measure the impact of our assets on consumer reach and decision making. For example, earlier this month, in a first part industry, we entered into a partnership with Foursquare to provide brands with daily campaign performance metrics across our digital displays. Using this new solution, powered by Foursquare's attribution product, our customers can evaluate an ad's performance by geography, time of day, demographic, and historical visitation.

They can then use this data to understand consumers' exposure to our displays and subsequent visits to retail locations and other points of interest. This is the kind of offering that is attracting new advertisers to out of home. We are not static billboards. We are a dynamic addressable ecosystem. Europe.

Turning to our business in Europe, based on the information we have today, we expect third quarter segment revenue to be between $245,000,000 and $255,000,000 representing about 95% of Europe's top line performance in the third quarter of twenty nineteen, excluding FX. We are very encouraged with the trends we're seeing. In Q2, all our significant markets showed strong improvement versus trading seen earlier in the year and advertiser sentiment remained positive, reflecting pent up demand and the return of large sporting events supporting our optimism regarding the future of our business. Adding to our momentum, we are now actively in pursuit of contract tenders, which have begun to open up again. In Belgium, we were awarded a ten year outdoor advertising contract covering Belgium's train stations.

With digital screens in more than 46 cities currently, we ultimately plan to grow our digital presence to 800 screens located in more than a 100 stations across the country. In France, we were recently awarded street furniture contract for Aix En Provence. In Barcelona, we renewed the outdoor advertising contract covering the bus stops across the city. Overall, we now operate 5,000 advertising spaces in the Barcelona metropolitan area and expect to surpass 150 digital street furniture units by the year end. Supporting our ability to take full advantage of the recovery, our digital footprint continues to expand in Europe.

We added 68 digital displays in the second quarter for a total of over 16,600 screens now live. Building on the strength of our platform, our RADAR rollout has been well received in The UK and Spain and has now been introduced to audience proximity planning in all of our major European markets. The introduction of our programmatic offering in Europe, Clear Channel Launchpad, has also gone according to plan. Following recent launches in The UK, Switzerland, Spain, Finland and The Netherlands, we launched in Belgium in June, and we are completing the launch in Italy. So in summary, revenue momentum is clearly building across our business as the recovery gains theme and our market continue to open up.

Advertisers are gaining confidence as vaccination rates increase, remaining restrictions are eased, and mobility builds. We're now seeing previously hard hit categories begin to light up again, which is broadening our revenue base and strengthening our outlook. We are well positioned to maximize the performance of our portfolio given the investments we've made in our digital, data analytics and programmatic resources as well as our efforts to stay in front of advertisers throughout the pandemic. We are now seeing a very healthy rebound in our business. And with that, let me turn it over to Brian to discuss our second quarter twenty twenty one financial results.

Speaker 3

Thank you, William. Good morning, everyone, and thank you for joining our call. As William mentioned, we saw a substantial rebound in our business in the second quarter with June revenue for Americas and Europe combined about 90% of 2019 revenue, excluding FX in China, and we are optimistic about our growth through the balance of the year. However, we continue to manage our cost base, including negotiating rent abatements in some of the markets most affected by COVID-nineteen as well as strengthening our capital structure. Moving on to the results on Slide four.

In the second quarter, consolidated revenue increased 68.6% to $531,000,000 Adjusting for FX in China, revenue was up 63.4%. Consolidated net loss in the second quarter was $124,000,000 compared to a consolidated net loss of $143,000,000 in Q2 of twenty twenty. Consolidated adjusted EBITDA was $97,000,000 in Q2 of twenty twenty one, a substantial improvement over Q2 twenty twenty, which was negative 63,000,000 Adjusting for FX, consolidated adjusted EBITDA was $99,000,000 in Q2 of twenty twenty one. Please turn to Slide five for a review of Americas second quarter results. The Americas segment revenue was $272,000,000 in the second quarter of twenty twenty one, up 36% compared to the prior year and at the high end of the guidance we provided in May.

Digital revenue rebounded strongly and was up 73.8% to 85,000,000. Local continues to rebound faster than national and was up 39.7 with national up 30.2%. Direct operating and s g and a expenses were down 5.7%. The decline is due in part to a 14.2% decline in site lease expense as a result of negotiated rent abatements. Additionally, credit loss expense was reduced due to improved collections and outlook.

These were partially offset by higher compensation costs driven by improvements in operating performance. Segment adjusted EBITDA was $127,000,000 up 170.6% compared to the second quarter of last year, with segment adjusted EBITDA margin well above average due in large part to non recurring items, including the negotiated rent abatements. Please turn to slide six. This slide breaks out our billboard and transit revenue. Billboard and other was up 42.6%, while transit was down 4.2, with airport display revenue down 4.7% to $25,000,000 Turning to Slide seven for a bit more detail on billboard and others Q2 revenue performance.

Digital revenue from billboards, street furniture and spectaculars rebounded strongly in Q2 and was up 97.6 to $75,000,000 with non digital up 27.1%. Next, please turn to Slide eight and a review of our performance in Europe. Please note that as I comment on the percentage change from the prior year, all percentages are adjusted for foreign exchange. Europe revenue was $247,000,000 Adjusting for foreign exchange revenue was $224,000,000 up 108.8% compared to the second quarter of the prior year, ahead of guidance we provided in our Q1 earnings call. Revenue was up across all countries, most notably in France and The UK.

And digital revenue was up 159.6%, a strong performance driven in large part by the rebound in The UK. Direct operating and SG and A expenses were up 33.2% compared to the second quarter of last year. The largest driver of the increase in direct operating expense was higher site lease expense, which increased 28.9% to $100,000,000 after adjusting for FX due to lower negotiated rent abatements, higher revenue and new contracts. SG and A expenses increased due to higher compensation expense as we ceased the temporary operating cost savings initiatives implemented in the prior year combined with lower government support and wage subsidies and higher commissions in the current year. Additionally, direct operating expense and SG and A expense increased due to $16,000,000 of severance and related costs for the restructuring plan.

These expenses are not included in segment adjusted EBITDA. Segment adjusted EBITDA was $2,000,000 after adjusting for foreign exchange. This is compared to negative $69,000,000 in Q2 of twenty twenty. Moving on to CCIBV. Our Europe segment consists of the businesses operated by CCIBV and its consolidated subsidiary.

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 that are deducted from CCIBV's operating income and adjusted EBITDA. CCIBV revenue increased $140,000,000 during the 2021 compared to the same period of 2020 to $247,000,000 After adjusting for a twenty three million dollars impact from movements in foreign exchange rates, CCIBV revenue increased $117,000,000 CCIBV's operating loss was $40,000,000 in the 2021 compared to $99,000,000 in the same period of 2020. Let's move to Slide nine and a quick review of other, which includes Latin America. As a reminder, the prior year results include Career Media, which was divested on April 28.

Latin American revenue was $12,000,000 in the second quarter, up $9,000,000 compared to the same period last year. Direct operating expense and SG and A from our Latin American business were $13,000,000 up $4,000,000 compared to the second quarter in the prior year. Latin America EBITDA was a negative $1,000,000 Now moving to Slide 10 and a review of capital expenditures. CapEx totaled $32,000,000 in the second quarter, an increase of approximately $8,000,000 compared to the prior year as we ramped up our investment in our Americas business. On to Slide 11, Clear Channel Outdoor's consolidated cash and cash equivalents totaled $564,000,000 as of 06/30/2021.

Our debt was $5,700,000,000 up 169,000,000 due in large part to the refinancing of the CCWH senior notes in February and June. Cash paid for interest on the debt was $67,000,000 during the second quarter and $212,000,000 year to date. Our weighted average cost of debt was 5.6% as of 06/30/2021. Moving on to slide 12. As mentioned, we continue to focus on managing our cost base and strengthening our cap This includes achieving $35,000,000 in rent abatements in the second quarter on a consolidated basis as a result of successful fixed site lease negotiations.

The majority of the rent abatements in the quarter were in our Americas segment. Also, we received European governmental support and wage subsidies in response of $2,000,000 in the second quarter. In June, we successfully completed an offering of 1,050,000,000.00 of 7.5 CCWH senior notes through 2029. We used the net proceeds from the offering to redeem the remaining outstanding 9.25 percent CCWH senior notes through 2024. Additionally, as we previously announced in May, we entered into a second amendment to the senior secured credit agreement extending the suspension of the spring financial covenant through 12/31/2021 and further delaying the step down until September 30.

Lastly, in June, one of our nonguarantor European subsidiaries entered into a state guaranteed loan for approximately $36,000,000 at current exchange rates, which is guaranteed by the government of that country in response to COVID-nineteen. And finishing with our guidance. As William mentioned, for the third quarter of twenty twenty one, Americas segment revenue is expected to be in the range of between $315,000,000 and $325,000,000 adjusted EBITDA margin expected to return to close to Q3 twenty nineteen levels. Our Europe segment revenue is expected to be in the range of between $245,000,000 and $255,000,000 adjusting for FX. Given our improved outlook, we are revising our second half revenue guidance from nearly 90% of 2019 levels to about 95% excluding FX in China.

Recoveries across the board led primarily by our digital roadside businesses. Additionally, we expect cash interest payments of $175,000,000 in the last six months of 2021 and $324,000,000 in 2022. We expect consolidated capital expenditures to be in the $165,000,000 to $175,000,000 range in 2021. This increase reflects our optimism regarding our prospects and our ability to capture new prospects to drive growth. Lastly, we are increasing our guidance for our liquidity balance as of 12/31/2021, including unrestricted cash and availability under the company's revolving credit facilities.

We expect the balance to be approximately $475,000,000 to $525,000,000 a $50,000,000 increase from the guidance provided in May. Please keep in mind that liquidity could vary based on timing of cash receipts and or payments at year end. That concludes my remarks. And now let me turn the call back over to William.

Speaker 2

Thanks, Brian. The recovery is now well underway across our markets, and we are continuing to see solid revenue momentum in the second half of the year with several of our markets ahead of 2019. We remain focused on strategically investing in our technology, including expanding our digital platform, further strengthening our data analytics capabilities and building our programmatic resources with the aim of broadening our presence among a greater number of advertisers and increasing our market share. Our business is soundly rebounding. Our organization is energized and we are very excited about the growth trends that are building across our markets.

As we invest in our platform, we will also continue to carefully manage our costs, supporting our efforts to drive profitable growth over the long term as well as maintaining our financial flexibility and objective to delever the balance sheet. As I mentioned earlier, I'm very excited about the future of the company and look forward to speaking with many of you over the next few months as we prepare for the leadership transition with Scott taking over as CEO at the end of the year. And now let me turn over the call to the operator for the Q and A session.

Speaker 0

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

Speaker 2

Yeah. Thanks.

Speaker 4

So maybe first, for Scott. It looks like the Americas q three guide is pretty close to 2019, as you mentioned. It sounds like airport is better but probably still down. And I'm wondering if street furniture probably is too in places like So just wondering how you think about the recovery in sort of the bits of weakness. And if we do see those get back to prior levels, how do you think about the EBITDA power in The Americas business as that's done?

And should we expect any lumpiness to expenses due to to rent abatements in the back half of the year? And then, William, in Europe, maybe you could discuss a little bit of what sort of margin do you start to expect as you get to full run rate revenues. I think of that as sort of a mid teens margin business. So just wondering, given all the cost work that you've done, how you think about it. And then lastly, Scott, just maybe what's next in terms of financial management.

Maybe you could discuss a little bit the covenant springing suspension and what you expect for free cash flow in the back half of the year and liquidity.

Speaker 2

Thank you.

Speaker 5

Hey, Steve. Thanks for questions. I think Brian will take that covenant one, though. So we'll we'll we'll let him get to that one. You know, on your question, I I do think q three is looking like it's gonna be pretty close, to, its counterpart in in 2019.

The things you named, airports and street furniture are the things that'll that'll probably lag. We still do have the dynamic that, some cities are recovering slower, than other cities, in the mix. New York is actually recovering quite nicely. We don't we don't have much in the way of street furniture there, but the the Times Square area is recovering nicely and the airports are recovering nicely along with the roadside that's done well. In terms of the margins, I think there's going to be some lumpiness in our margins for a bit.

I mean, you you witnessed it to the positive this quarter.

Speaker 2

Yeah. We we've kind

Speaker 5

of been consistent in talking about these negotiations are often for relatively big chunks of money, and they, you know, are hard to predict. And, you know, we're never 100% sure how they're gonna come in. You know, a couple things will happen over the next three or four quarters. One is we are still working on some some relief, you know, on on contracts that, you know, looking back even over last year. I think the other happen is you'll see some of the relief that we've gotten come out.

And so the, the margins will be, it'll it'll take a bit of time for us to get to, you know, what we'd call steady state margins. But I I don't think it's gonna be wildly dramatic either. Hopefully, that answers your question on the The US margin recovery. Yep. William?

Speaker 2

Yeah. I'll take the, I'll take the European question. I I I'm not gonna give you any kind of guidance on on what may or may not happen to margin over the coming months and years, Steve, and I don't think you'd expect me to. We will continue to be very vigilant on costs across the European business. I think we've done some excellent work that we've talked about on previous calls in terms of the cost reduction program and the restructuring, and that will continue to have impact in the coming years.

But obviously, what we can't predict is the impact of some of the the changes in inventory that we may see in the in the months and years ahead. So I think I'll just leave it at that on margin unless Brian wants to add anything before he takes on the, the covenant question as well.

Speaker 3

You know, the only thing I would add is, you know, as the recovery continues and incremental revenue is added, that's obviously going be beneficial. And I think we're seeing that, in Europe. So hopefully that's helpful, Steve. Think we feel pretty good about the direction we're headed. On the covenant question, you know, I think the two key things to think about are, one, the relief that we got with respect to the the springing covenant itself, goes through the end of the year.

And so we'll report our first, you know, covenant calculation, at our March 31, kind of compliance date. And, you know, the second piece of the was a pushback of the step down, in this measurement, and that push down was out to September of of twenty twenty two. So I think those are the the two things to think about. And in exchange for that, we do have to maintain, $150,000,000, you know, minimum liquidity. But I think I think you can see from our liquidity guidance, we feel very comfortable about that.

The trajectory of the business, we've actually upped our liquidity guidance to four seventy five million to $525,000,000 by the end of the year. So I think we feel pretty good with, you know, where we are with respect to the, you know, the the the covenant relief. And, you know, I would add, it's a springing covenant. So we always pay off the the drawn amounts under the facility, and, you know, we we are looking like we have the liquidity to do that. Should we, should we choose that path as well?

Speaker 4

Thanks, and, congrats, Scott and William.

Speaker 0

Next question comes from the line of Vivekanza with Cowen.

Speaker 6

Hi. Thanks, guys, for taking the questions and great job on the quarter. William, thanks for your leadership. Obviously, it's been a difficult time. My question for you is, it sounds like your new role, I think you mentioned it would include evaluation of strategic considerations, I.

E, M and A. So I'm wondering, can you give us an update on what the M and A environment looks like today with the COVID recovery so well developed? I imagine it's possible to sell assets again. Am I right about that? I mean, away from Clear Channel, are you seeing deals get done?

And then if you could comment perhaps on whether you've ruled out any types of transactions or perhaps you could help us focus on what types of transactions we would be most likely to see, buy versus sell, region versus region, size, core versus noncore, like I think.

Speaker 2

Right. How much detail do you really want me to give you? Let let me let me say first, away from away from Clear Channel, as you say, I think the the m and a environment is certainly getting more active. People are undoubtedly seeing markets return, valuation gaps are narrowing, and, there's a lot more going on, right now than there was this time last year for for very obvious reasons. So so, yes, it's more active.

And, yes, my new role certainly will involve me in looking at, strategic opportunities for for the business across our across our footprint. I don't really think you would expect me to give any kind of indication of where we might be looking to transact or what kinds of transactions we might look at. We're very conscious that in February, we we said on our earnings call then that we would look to focus the business more on the higher margin assets, and and that remains our strategy. So that can lead you to some fairly some fairly obvious conclusions, I would think, about the the geographies that we would we would be looking at. But as to timing, I I don't think we would want to say anything more at the moment other than that things are certainly getting more active, and we will continue to evaluate all opportunities as they appear and as we would consider that they would deliver shareholder value.

I think I should just leave it at that, but thanks.

Speaker 6

No. That's great. That's great. And and my my other question is just and and not to be the the pepper in the punch bowl here, but what about the delta variant? I mean, it doesn't sound like you're worried about it, but why doesn't that risk derailing the recovery in your view?

Speaker 2

Yeah. I I mean, I I think I'm, what I would say, appropriate worried about it. You know, any any variant of of this of this virus is is concerning to us, and we we've all seen too much over the last fifteen, sixteen months to be in any way complacent. What I would say is what what I've observed, and we've had more experience of it, Europe than in The US so far. What I've observed and and what I think, is confirmed by all of the analysis, the delta variant is highly infectious, it does appear that the vaccines do offer some significant resistance and are resulting in significantly lower hospitalizations, as a result of as a result of that, I think it is highly probable that governments will continue to resist imposing any further restrictions.

And as you'll know, you know, in in The UK, which has been the most affected by the Delta variant so far, in The UK, our government has taken a very conscious decision to unlock the economy and remove restrictions at the very time that infections from the Delta variant were increasing, and they've done that because they feel confident around the hospitalization rates. So look, you know, I'm not an epidemiologist. I'm not an expert on the topic, but I would say based on what we know today, our views about the second half of the year, stand as stated, and reflect a confidence in the recovery. If something changes in the way in which the vaccines protect against the delta variant, then, you know, all bets are off. But that's how I see it at the moment.

Thanks so much guys.

Speaker 0

Your next question comes from the line of Jim Goss with Barrington Research.

Speaker 7

Thank you. I've got a couple also. First, going back to the margin question, would you say the domestic margins should have a sustainable target level north of 40% as recover in all areas and you've got the benefit of digital and you also have potentially some costs and expenses that may have been cut during the pandemic that, you might be able to keep under control in the future? That would be the first question.

Speaker 5

Brian, do you want me to speak

Speaker 6

to that or do you

Speaker 5

want to take that one?

Speaker 2

I think Brian is going take it. He's

Speaker 3

yeah, sorry. Scott, I'll take it and then obviously you can have some color and add in if you'd like. Look, 40% sounds like pre COVID level margins in The U. S, and I think that that's certainly something we'll strive for. We do have some tailwinds from cost saving initiatives that we've put in place and other things, but we also have headwinds from such things as portfolio mix.

So I think the first thing that has to happen is we have to get back to the revenue level. But even once we get back to the revenue level, we will really need to, you know, work on keeping the cost savings in place to get back to that 40% level because we do have to make up for some portfolio mix changes. And that's just the nature of the business, that even if revenues go back to 2019, doesn't mean your business makeup is the same. And so those are kind of the pushes and pulls. We likely will need, you know, to continue to work at it, to get back to the 40% level, but we, you know, we won't be far off as we continue to recover from COVID.

Scott, do you have any additional color you'd like to add?

Speaker 5

I mean, I think the only other thing I'd call out is that seasonality does matter in this business. And so it may not be 40% every quarter, as as we think about that, as as things play out. But I I think your answer is right on.

Speaker 7

Okay. Thanks. So and one other thing maybe I'll touch on. The the increase for digital was significantly greater than the increase for billboards and more than would account be be accounted for by platform changes. And I'm wondering if there are certain cat advertisers who are considering both formats in various areas.

And what what are the factors behind your decision making? And, you know, as to what which which appropriate for them? And is this, starting to create a little better pricing power on the digital side as you're seeing seeing that, utilization improve?

Speaker 5

So I'll I'll take a run at this from The US. And then, William, if you wanna add anything internationally, we can we can touch on that as well. So I I guess I guess, first and foremost, as you look at the recovery, you gotta remember how things fell too because our, printed assets did not fall nearly as far, as digital did. And so part of why you're seeing the big growth in digital now is because it's it's comping against significantly worse numbers. If you go back and look at our q two of last year, you know, digital was, was hit much harder than printed.

In terms of your question about advertisers making decisions, I think there's a there's a variety of things going on. And foremost, digital has an immediacy to it. And so with advertisers reacting to things rolling out across the country, digital has given them a very convenient way, to activate in in markets as markets get more secure, more stable, and and people get out on the streets more and things like that. I think we're developing different use cases for digital, whether it's in the in the programmatic use case or roadblocks or something that we're doing, more and more of. There are just different use cases for it that advertisers use, whether it's for a film release or for a new product launch or trying to, sustain momentum in a in a a place, you know, with, a CPG type product where where they're looking to heavy up, digital gives them the ability to do it.

So I I do think digital, you know, it it has been a premium product, since we developed it. It's, it remains a premium product. It's on some of our best locations, that we've converted to digital. And so, you know, I I do think it it's something that, we we receive, very attractive economics for. And, in this business, whenever you have, demand strong, you you see that that dynamic.

William, I don't know if you'd add anything incremental to that as well.

Speaker 2

No. I think you've nailed it, Scott. Thank you.

Speaker 7

Okay. And lastly, are there any broad categories showing greater resilience? You've mentioned a couple of the say, consumer, technology, media, are are there some that are really driving the recovery right now for you?

Speaker 5

Again, sort of from a from a US perspective, we we went out and got a number of new categories active, during COVID. And what we're seeing now as things build back is some of the industries that were hit really hard during COVID are are coming back. So, you know, theatrical is probably the most obvious in terms of film releases. We've had a number of good strong film releases this year and a really good pipeline of film releases coming. So they've come back.

Amusements have come back. You know, you've seen, travel and leisure come back. Those are all categories that were hit really hard, and that's building on top of, you know, some things like in home improvement, real estate categories that we actually were able to develop pretty successfully during COVID. So, it's a it's a good time in the, in the business right now having traditional advertisers coming back, building on top of, some new categories that we've done a lot to develop during COVID.

Speaker 7

Okay. Thanks, congratulations, Scott.

Speaker 2

Thanks, Joe.

Speaker 7

That's it. Thanks.

Speaker 0

Thank you. There are no additional questions at this time. I would like to turn it back over to Mr. Eccleshare for closing remarks.

Speaker 2

Thank you, and thank you, everyone, for joining our call today. I just wanted to end by just making a few comments as we announced the CEO transition today. I don't step down until the end of the year, and I will continue to serve the company, as you know, as executive vice chairman in to 2022. But I would just like to say it has truly been, a great honor for me to lead this business over the last few years, to lead the digital transformation of the the greatest the greatest mass reach medium of them all. To take this company into full public ownership, with a full NYSE listing is a it was a fantastic step for for this business.

To lead this business through the pandemic and see the resilience of our people, and I have enormous pride in the way that our people stepped up and continue to to drive and and develop the business in in really tough circumstances. And finally, to say that the the pride I have in in handing over to Scott as my successor, who I know will continue to build the business, to grow the business, and to develop it and build on all of the things that we've done, over the last years. So just thank you to everybody. You will continue to hear my voice on this call, certainly for the next earnings call. And thanks everybody for joining us.

Speaker 0

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