Clear Channel Outdoor Holdings, Inc. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Delivered second quarter consolidated revenue of $559 million, up 5.2% (5.4% excluding FX).
• Performance reflects healthy demand across most markets, with strength in Airports and Europe-North.
• America segment second quarter results were at the low end of guidance due to national softness, but current quarter trends are improving.
• Increased full year guidance for consolidated revenue, adjusted EBITDA, and AFFO due to strength in Airports and Europe-North.
• Benefiting from digital billboard platform, data analytics capabilities, and expanded sales team/direct outreach.
• M&A negotiations for Europe-North ongoing, LATAM sale process progressing, and cash generation turning corner with AFFO expected to outpace discretionary CapEx in the second half of 2024.

Segment Performance

• America: Second quarter revenue was $290 million, up 0.9%. Digital revenue accounted for 35.3% of America revenue, up 4.1% to $102 million. National sales (35% of America revenue) were down 3.3% on a comparable basis, while local sales (65% of America revenue) were up 3.4% on a comparable basis. Segment-adjusted EBITDA was $127 million, down 2%.
• Airports: Revenue was $86 million, up 21.4%. Digital revenue accounted for 56% of Airports revenue, up 14.6% to $48 million. National sales (57.7% of Airports revenue) were up 12% on a comparable basis, and local sales (42.3% of Airports revenue) were up 37% on a comparable basis. Segment-adjusted EBITDA was $19 million, up 16.8%.
• Europe-North: Excluding movements in foreign exchange rates, revenue increased 10.1% to $165 million. Digital revenue accounted for 56.8% of Europe-North's total revenue, up 17.9% to $94 million. Segment-adjusted EBITDA was up 24.7% to $33 million.
• CCIBV: Revenue increased 6.4% to $165 million, excluding the impact of foreign exchange, it was up 6.6% due to growth in Europe-North, partially offset by the loss of a contract in Singapore. Operating income was $10 million compared to $3 million in the prior year.

Guidance

• Third quarter consolidated revenue expected between $542 million and $567 million (3%-8% increase over Q3 2023).
• Full year consolidated revenue expected between $2.215 billion and $2.275 billion, adjusted EBITDA between $560 million and $590 million, and AFFO between $90 million and $110 million.
• America revenue expected between $1.135 billion and $1.165 billion, Airports revenue between $350 million and $365 million, Europe-North revenue between $653 million and $668 million.
• Capital expenditures expected between $130 million and $150 million, with focus on digital footprint in the U.S.

Risks

• National marketplace softness, particularly in medical services and media entertainment verticals.
• Complexity in the Europe-North sale process due to the business's many moving parts.
• Potential impact of election cycles on ad spending and political campaign crowd-out effects.
• Credit losses and specific reserves for certain customers in the Americas.

Question and Answer

• Q: Provide more color on national versus local ad trends in the U.S. market, verticals driving strength/weakness, and trends into Q3. A: Scott Wells noted national market is competitive, emphasizing need for tailored solutions for verticals. Airports have stronger differentiated offerings than roadside. Current quarter trends are improving.
• Q: How to think about AFFO growth beyond 2024? A: David Sailer mentioned turning corner on cash flow generation, with AFFO expected to outpace discretionary CapEx in the second half, and growth flowing from top-line expansion.
• Q: Can Airports be used to pull in new advertisers for billboard inventory in America? A: Scott Wells said cross-selling airports to roadside has had limited success, with airport advertisers focused on airport audiences and roadside buyers seeking broader reach.
• Q: Trends in new advertisers at airports, their efficacy feedback? A: Scott Wells said new advertisers are a mix of existing verticals deepening and new verticals, with a focus on targeting verticals and leveraging travel rebound, but advertisers can be transient.
• Q: Credit losses in Americas, how to think about them? A: David Sailer said credit losses are part of business, with teams doing well in collections, and one pop-up in Q2 not indicating a trend.