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    Clear Channel Outdoor Holdings Inc (CCO)

    Q2 2024 Earnings Summary

    Reported on Jan 21, 2025 (Before Market Open)
    Pre-Earnings Price$1.42Last close (Aug 6, 2024)
    Post-Earnings Price$1.31Open (Aug 7, 2024)
    Price Change
    $-0.11(-7.75%)

    What went well

    • Strong performance in the Europe-North segment, with adjusted EBITDA growth of 21% on revenue growth of 9%, excluding foreign exchange effects, demonstrating operational leverage and potential value realization upon sale.
    • Airports segment showing robust revenue growth and higher-than-expected margins, with revenue growth at 20% and margins exceeding mid-teens expectations, driven by increased demand and new advertising customers across existing and new verticals, leveraging high travel demand.
    • No increase in commitment cancellations, indicating stable advertiser demand and a potentially strong advertising market in the second half of the year, with fundamental drivers remaining sound and increased traffic enhancing asset value.

    What went wrong

    • Uncertainty in the sale of Europe-North assets: The company acknowledges that negotiations for selling the Europe-North properties are complex, with interest from buyers ebbing and flowing. This uncertainty may delay debt reduction and strategic refocusing efforts.
    • Credit losses in the Americas segment: There were credit losses due to specific reserves for certain customers in Q2, indicating potential issues with customer credit quality and the possibility of future credit losses impacting financial performance.
    • Intense competition in national advertising: The national advertising space, especially in roadside markets, is highly competitive. The company needs to invest more effort and resources to improve its performance, which could pressure revenues and margins.

    Q&A Summary

    1. Strategic Review for Europe-North
      Q: Does strong Europe-North performance complicate its sale?
      A: Scott Wells stated that the healthy performance of Europe-North is positive for its sale and not a complicating factor. Selling a well-performing business is preferable, and they are committed to getting fair value for the asset.

    2. AFFO Growth Beyond 2024
      Q: How should we think about AFFO growth beyond 2024?
      A: David Sailer explained that as they grow EBITDA, it will flow through to AFFO growth. He feels confident about AFFO growth, expecting it to be positive in the second half, with top-line growth flowing down to AFFO growth.

    3. Credit Losses in Americas
      Q: Provide more color on credit losses; is it one-time?
      A: David Sailer stated that credit losses are a normal part of the business and nothing to be concerned about. They had a credit loss in Q2, but overall, they do a good job collecting cash.

    4. Commitment Cancellations
      Q: Have you seen an uptick in commitment cancellations?
      A: Scott Wells noted they are not seeing a bunch of cancellations. Conversations with advertisers suggest a decent ad market in the second half.

    5. National vs Local Ad Trends
      Q: Can you provide color on national vs local ad trends?
      A: Scott Wells described a competitive national market where differentiation is critical. Emphasizing vertical markets and expertise is important. Local markets vary, and being abreast of what's important locally is key.

    6. Political Advertising Impact
      Q: Were improving trends specific to national or overall? Impact of political ads?
      A: Scott Wells clarified his comments were about advertising in general. He believes campaign spending will be positive due to crowd-out effects, and they've been educating campaigns on digital assets.

    7. Margins in Airports
      Q: Discuss expected ramp down in margins at Airports.
      A: Scott Wells noted margins have been holding up. David Sailer added that as revenue grows, margins improve, and they might get over mid-teens.

    8. Q3 Improvement Outlook
      Q: How should we think about national improvement in Q3?
      A: Scott Wells acknowledged that softer comps in Q3 are a factor. However, he isn't sure media and entertainment will be a big tailwind.

    9. Interest in Europe-North
      Q: Has interest in Europe-North properties picked up?
      A: Scott Wells said they've had broad-based interest for a long time. The good performance is positive, and they're committed to getting fair value.

    10. Recession Risks
      Q: What risks exist regarding recession concerns?
      A: Scott Wells believes the fundamental drivers of demand are sound. Political campaigns can present risks, but overall, advertisers' P&Ls are doing fine.

    11. Airports and Billboard Advertisers
      Q: Have Airports helped pull in new billboard advertisers?
      A: Scott Wells said they've done some cross-selling, but the propositions are different. Airport advertisers focus on airport audiences, so it doesn't translate well to roadside.

    12. New Airport Advertisers
      Q: Are new Airport advertisers in existing or new verticals?
      A: Scott Wells said it's a mix of deeper within existing verticals and developing new ones. They've targeted fitting verticals and done a nice job.

    13. San Francisco Update
      Q: Could you update on San Francisco in Q2?
      A: Scott Wells stated it's improving but has a way to go. Traffic is back, and the city continues to improve.

    14. Work from Home Impact
      Q: Has work from home affected your business?
      A: Scott Wells said traffic is up globally. Though the world hasn't returned to 2019, people are still driving, so asset value has increased.

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