Q1 2020 Earnings Call
Ladies and gentlemen, today's conference scheduled to begin momentarily until then who likes like every place on musical thank you.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the 2021st quarter earnings.
This conference call for clear channel outdoor holdings Inc.
At this time all participants are any listen only mode. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to him the conference over to your host Eileen Mclaughlin Vice President Investor Relations. Thank you. Please go ahead.
Good morning, and thank you for joining clear channel outdoor holding 2021st quarter earnings call.
On the call today, our William Eccleshare worldwide, Chief Executive Officer, and Brian Coleman, Chief Financial Officer of clear Channel Outdoor Holdings, Inc.
Provide an overview of the first quarter 2020 operating performance a clear channel outdoor holdings Inc. After an introduction interview of our results well open up the line for question and Scott Wells, Chief Executive Officer of clear channel outdoor holding outdoor Americas will participate in the Q.
In a portion of the call.
Well, we begin I'd like to remind everyone that this conference call includes forward looking statements. These statements include managements expectations beliefs and projections about the performance and represent managements current beliefs.
There could be no assurance that managements expectations beliefs projections will be achieved or the actual results will not too different for an expectation. Please review the statements separate contained in our earnings press releases and filings with the FCC.
During todays call 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 releases.
Earnings Conference call presentation.
Which can be found in the financial section of our website Www Dot Investor day clear channel Dotcom a different. Additionally, when we reference our business in China, we're referring to our 51% investment unclear need via minutes. It a public company that trade on the Hong Kong stock Exchange. Please note that.
Our earnings release and the slide presentation are also available on our website www dot investor Dot clear channel Dotcom and are integral to our earnings conference call. They provided detailed breakdown of foreign exchange and noncash compensation expense items as well as segment revenues and adjusted EBITDA.
Other important information not reason, yes, you beat you each slide as William and Brian comment on them also please note that the information provided on this call speak only to management's views as of today.
<unk> 620, 20 and may no longer be accurate at the time of replaced with that.
Please turn to page three in the presentation and I will now turn the call over 2 billion I can show.
Thank you I need and good morning, everyone. Thank you for taking the time to join today's cool.
I'd like to start by saying that I have you and your families a well and say I know you were managing to adapt to the extraordinary world in which we now find ourselves.
As I see in many of you are doing Brian Scoffs Valley conducting the school what might be today. So please bear with us in case, there are any kind of going issues during the cold.
It's been just every year since we began executing our vision as an independent company.
I can truly say that he could be an incredibly transformer to journey, Okay channel.
The strength about mobile platform combined with our focus on the full key couldn't it's about strategy growing the out of high medium technology leadership customer focus.
Opportunistic expansion has continued to deliver the flexibility and creativity that our customers want.
All right investments in technology leadership, both you're not digital network and Alfredo platform continue to drive growth, particularly you know U.S. season.
However.
We all know the spread of Cobiz 19 Noxema.
Affected the general economic climate has an impact the bottom businesses in every sector, including ours.
The important peak in Q1 was largely on our European businesses and of course in China.
Due to the continued play will spread to the virus, including throughout the United States, We anticipate significant impact on our results to watch all business during the second quarter on for the rest of the year at more cuts and that's a buying decision and reduced marketing spend.
We should acknowledge though that's the situation continues to evolve the full magnitude and duration of the downturn and its impact on our results difficult to predict.
We monitor the situation on a daily basis.
Let's sell plans according to the Macy's market intelligence.
We have that will take the number of action to enhance liquidity, because the about financial flexibility and support the comps and you'll see it all platform and operations, including implementing extensive cost saving initiatives.
Darren will discuss the details of our plan in greater detail shortly but be assured the actions we are taking our extensive.
Yeah targeting over $100 million reduction in operating costs in Q2.
And at least $25 million reduction in capital expenditures in the second quarter.
Well focus is on positioning clear channel commodities through the economic downturn leveraging the what we had done to transform our business over the last year as one of the ongoing initiatives to reduce cost and improve liquidity.
Before getting into more detail on the current environment and our response.
Do you want to provide composites highlights from the first quarter.
As we indicated in an earlier press release.
Americas segment, which accounted for approximately 70% of segment adjusted EBITDA fits could be a twentys team has delivered another strong quarter, he's revenue of 8.5% and adjusted EBITDA up an exceptional 18.5.
In the first quarter of 2020.
This is on top of the 6.6% topline growth.
Of course from 29 team they truly delivering on our aspiration upgrades on great.
Our investments in digital continues to drive great accounting for approximately one third of the Americas total revenue, an increasing 20% in the quarter.
Additionally, as I've said, a key part about strategy is to explore opportunistic transactions that helped strengthen our balance sheet by improving our financial flexibility and enabling us to invest in the continued transformation about business.
In March I was pleased to announce the following strategic review of our investments in China. We reached an agreement to sell all 51% stake in Mclean media business to a consortium called at all harmonic.
Yes, it's just one agreement to sell couldn't media demonstrates the fundamental strength of the out of home medium even during difficult market conditions and that this most challenging period in China's recent history.
We have formally accepted ever harmonics alpha and expect to see the proceeds of approximately 253 million U.S. dollars later this month.
We plan to use the net proceeds of approximately 200 and trenching in U.S. dollar to improve our liquidity position an increased financial flexibility.
The success that we achieved prior to the could be 19 crises, notably in accomplished without the hard hard work dedication from our teams around the globe.
With that said we are now in an entirely unprecedented environment for all business.
As a global organization, our employees customers and supplies have been impacted by Koby 19 in every country in which we operate.
Our top priority health and safety of our employees in the face of evolving challenging.
We have made an unequivocal commitment to make the well being about people that families that Connie I'll first priority. This extraordinary time.
And as we do said our team continues to show remarkable flexibility and professionalism and adapting to the current environment.
From our initial transition of employees to work from home in Italy in early March to a firm wide global deployment by the end of March our teams were able to make the ship seamlessly.
We are proud that our inventory has been able to facilitate messages and support to frontline medical team, that's responders to delivery professionals and foodservice working every day in all parts of all world.
What is being used by local and state Nash National government to remind citizens to stay at home and how to say safe.
Looking ahead I'll strategy remains focused on growing our dependence share total media spend by leading the technology driven transformation of the medium undergo a share of central out a pen spending by leveraging our distinctive asset base.
With that said however, we have seen a significant decline in our customers near term demand given the current circumstances.
The impact could be 19, the sheltered in place chronicled implemented around the world you significantly affecting the behavior movement of consumer is on target audiences.
The scale and speak with which near term demand has declined and request to why the deferred or canceled current contract.
Precedented.
Oh sales team are working round the clock to protect revenue and doing what they can to alleviate the short term impact.
However, the can be no question, so you're going to have a challenging revenue performance in the second quarter.
Focusing first on the U.S., we started to see the downturn at the end of March Fortunately the quarters. They started off very strongly and this is mitigated the impact of the slowdown in the full quota.
That's a shelter in place rules expanded across the United States, our team quickly build a playbook to create a process.
Having customer conversations in a more consistent manner, while focusing on landing on the solution that fits that unique situation.
I'll focus on the customer and our ability to understand the real need behind their request remains critical to off with us.
We're only one month into the second quarter and given the uncertainty in the marketplace. It is difficult to extrapolate the declines in April into the full quota on the balance of the a this time.
At this point May and June or set of challenging, but it's still too early to comment on the positive impact we may see the markets start to reopen.
I can't stress the know how diverse seem to be around the U.S., which makes generalizing very difficult.
From a customer group perspective national declined more than local in April and we're seeing substantial declines across all product line so far in the quarter.
Our strong foundation of iconic performed inventory alleviate some of the downward pressure, but Q2 will certainly be a challenge SCUSA and we're pulling all available neighbors to bring costs in line with declining revenue.
Now moving to the international business.
We're seeing an even more dramatic decline in customer demand in our European markets as a result compared to 19.
This is partly due to the earlier and most of their not dogs imposed by European governments.
And also due to the nature about citibank's format.
We've already taken and we'll continue to take appropriate sets doesn't show the continuity of all platform and operations to serve our customers.
The European countries gradually reopened businesses.
<unk> sheltering place mandates.
We started seeing the done would impact across some European markets in early March inline with what when government advice on lockdown hit markets, such as Italy, France and Spain.
And that downward impact continued across all European market through April.
And from our largest market in Europe, there not done with the not mid March resulting in a sharp downturn in advertising spend ended the first quarter offsetting the revenue from the Paris Street furniture contracts.
The lock down has been extended to maybe 11 at which time transplants to progressively lift restrictions on travel in business and.
In April we experienced a substantial decline in revenue in France.
In the UK second largest markets in Europe. The team was able to deliver another quarter of topline growth in the first quarter driven in large part by all continue investments in digital.
However, with the country in full looked on the last week of March the second quarter will be challenging.
In April the UK was down significantly we expect to see some partial lifting of the locked on by the end of May.
It is still early in the quota and we still don't know when and how the market will rebound from the impact to kind of in 19.
Throughout South America is an international businesses as well as at the corporate level. We are taking a highly disciplined approach in managing our use of cash through this period, while preparing for the other side of this crisis.
At the same time, we're also taking the appropriate steps to help position us to effectively support advertising partners.
I would want to quickly take advantage of renewed opportunities for connection with that customers often lengthy sheltered in place well does begin to relax.
Oh sales teams are an active discussions with our customers to develop advertising plans as restrictions are lifted.
Importantly, we believe the technology investments, we've made specifically and expanding our digital footprint globally and building out our radar platform in the U.S.
Traditional businesses to meet our customers' needs as we all knew through this unprecedented economic downtime.
We're pleased that our customers continue to use radar the vital to allowing brands to effectively platinum measure their out of home campaign against specific audience segments, not particular consulting businesses, such as grocery stores they'll pharmacies experience not only sustained activity, but an increase in April visitations.
In particular, we are leveraging on mobility data to gain greater insight into traffic cop.
When consumers start returning to public knowledge.
And we believes the depth of all digital inventory provides the flexibility to quickly ramp up advertising campaign, most affected the target the rights audiences at the right time.
It is of course still early and we expect challenges as we work to better align certain aspects of our business to best serve our customers in his new environment.
Although our team remains committed to executing our vision to deliver leading platform in the industry and I remain confident in the fundamental strength of out of home our distinctive portfolio of digital them printed displays and teach and its ability to drive long term value creation when the economy rebound.
Now I'd like to turn it over to Brian to discuss up the schools are Twentytwenty financial results.
Thank you William Good morning, everyone and thank you for joining our call. This morning.
As William mentioned, we have seen a significant impact where business as a result of to shelter in place orders markets. However, we believe the initiatives. We are taking most linking our financial position that's important to continuity of our platform and operations as we work through the economic downturn.
Before discussing the details of the steps, we're taking to increase liquidity preserve financial flexibility I do want to review our first quarter results as William mentioned, the Americas team delivered a tremendous quarter demonstrating the effectiveness of our strategy prior to covert 19, and what we believe will help us manage our business now.
Oh and best position clear channel once we are beyond this crisis.
Moving onto the results on slide number four.
During the past during our GAAP results discussion I'll also talk about a result, adjusting for foreign exchange, which is a non-GAAP financial measure.
We believe this improves the comparability of our results to the prior year.
As I mentioned last quarter, beginning in 2020, we're transitioning to a new reporting metric, replacing away the darn with adjusted EBITDA as we believe this metric is more useful to the investment community.
Additionally, we have changed so segment information to reflect changes in a way businesses manage and how resources are allocated by the company's chief operating decision maker.
Effective January 1st 2020, there are two reportable business segments, America's which hasn't changed and Europe, which consist of operations in both Europe and Singapore.
Our remaining operating segments or China in Latin America, which do not meet the quantitative thresholds to qualify as reportable segments and their disclosed asphalt.
Of course, China will no longer be included in our results following the sale of clear media.
Consolidated revenue decreased 6.2% to 551 million <unk>.
<unk> adjusting for foreign exchange it was down 4.7%.
The strong performance in the Americas segment was offset by declines in both Europe, and China, primarily as a result of covered 19.
Consolidated net loss increased from 170 million in 2019 to 289 million in 2020.
Adjusted EBITDA, excluding FX declined 47% with growth in Americas, offset by weakness in Europe and China.
Normally.
I would not take some time to discuss our Q1 results for businesses in greater detail.
However, as William spoke to earlier results in Q1, particularly the growth we saw in the Americas or not reflective what we're seeing in Q2.
As such I'm going to focus the remainder of my remarks, and our current financial position as well as our after which in Q2 to mitigate the impact of the downturn.
For more detail, our Q1 results I'll refer you to slides.
Five through seven of the presentation.
The earnings release, we issued and our 10-Q, which has been filed with the FCC today.
Now onto slide eight to discuss Capex.
Capital expenditures totaled 36 million in the first quarter 2020 was 16 million and our Americas segment, and 10 million in our Europe segment, primarily.
From constructing and sustaining or Billboards Street furniture, and other out of home advertising displays including digital.
Most of this was spent before we started seeing the impact of cope with 19 in March.
The majority of other capex or like shore investment in China.
With cap, that's a 4 million primarily relates to equipment and software purchases.
Now onto slide nine.
[noise] clear channel outdoor is consolidated cash and cash equivalents totaled 372 to 372 million as at March 31st 2020.
This balanced included 69 million of cash held outside of the U.S. to cash held my clear immediate limited 31 million is now included in assets classified as held for sale and not included in the consolidated cash and cash equivalents.
Our debt was 5.2 billion up about 150 million as a result are drawing on the cash little bit fault ripping into March.
The weighted average cost of debt was 6.4% than the first quarter with 2020 down from the prior year due to the refinancings, we completed in 2019.
Cash interest payments for the debt for debt during the quarter were 146 million. This was office compare to the first quarter 2019, due to timing of payments the company anticipates, having approximately 175 million a cash interest payment obligations throughout the remainder of 2020.
The springing personally net leverage ratio was 5.37 times as at March 31st 2020 below the requirement of 7.6 times.
However, we expect a ratio to increase during Q2, both as a result like reduce operating performance and the loss a clear media's consolidated adjusted EBITDA following its sale.
So quickly the company is actively considering options with respect to additional liquidity measures and or covenant flexibility.
Moving on to slide 10.
In light of the rapidly involving impacted coping 19, we've implemented a number of actions to improve our liquidity position and provide us with additional financial flexibility to manage through the economic downturn.
As previously announced in March 24th we made a cautionary draw the hundred 50 million under our revolving credit facility.
In addition on March Thirtyth, we announced that we had entered into an agreement or ever vocally sellers taken care of media.
Although the sales process started well before the impact the pandemic. We expect the net proceeds of approximately 220 million will provide us with additional liquidity to support our business. During this time.
On April 20, Eightth, we tendered our shares to ever harmonic global limited and expect to receive the proceeds later this month.
William discussed, we anticipate significant adverse effects on our results throughout our business during the second quarter.
In response, we initiated a gross aggressive cost cutting initiatives focused on capital expenditures six like lease expenses compensation and discretionary spending.
The team to work early and quickly to identify opportunities to delay capital expenditures with discretionary growth capex largely deferred.
We already got renegotiating certain contracts were committed capex and are closely evaluating all sustaining capex projects for potential deferral.
We believe we can reduce planned capital expenditures for the balance of the year by more than one half from our plan.
[noise] site lease expense accounted for about 50% or total operating expenses and the majority of these expenses are fixed.
So it was important that we immediately start working within various landlords to aligned fixed site lease expenses with the revenue during the economic downturn.
Our focus initially was on a minimum annual guaranteed payments most often part of street furniture and transit contracts, but has expanded to include certain Billboard contracts. These are complicated negotiations, but we're achieving success in both Europe and the U.S.
In April we initiated temporary salary reductions at all levels of the organization, including 30% reductions for both William our global CEO and Scott walls and America CEO.
We have also for avoiding furloughed employees based on market conditions and have initiated a hiring trees.
We're also aggressively cutting discretionary spending.
As William said earlier, our goals to achieve operating cost savings in excess of 100 million and capital expenditure savings and excessive 25 million during the second quarter 2020.
Finally, I want to remind everyone that the full going initiatives are in addition to the steps. We completed last summer had extended the maturity profile over debt and reduce cash interest payments.
We believe that these initiatives as well as a net proceeds from the sale of clear media and cash on hand will provide us with the liquidity and the financial flexibility to enable us to meet our working capital capital expenditure debt service and other funding requirements for the next 12 months.
However, we may take further cost cutting measures would be almost discussed about two increased financial flexibility and generate liquidity in the event of an unanticipated need for cash in addition.
We regularly consider and enter into discussions with our lenders slated to potential financing alternatives, which may include supplemental liquidity through issuance of secured and unsecured debt or other capital raising transactions as well as given the current environment negotiating further financial flexibility the.
Central amendments to our debt agreements.
Now, let me turn the call back to William for his closing remarks.
Thank you Brian as you can see our team have been actively responding to this crisis from an operational financial and strategic perspective.
Looking ahead I'm confident that we're taking the right steps to protect our global team because of a financial flexibility I didn't show that we are in the best possible position such success when we emerge from the kind of the 19 crisis.
We're moving forward with an aggressive targeted approach to executing our short term strategic priorities.
And I'm confident that the resilience of our business and agility about team that represent the company's unique fundamental strength.
We have firm plans in place to capitalize on the gradual rebound and actively working with Brent to ramp up advertising for post coded campaign.
Throughout all of this we continue to prioritize the health and safety of our employees.
I look forward to providing updates regarding our progress now Scott will join Brian and myself and taking your questions.
Operator.
At this time, if you like asking audio question you may do so by pressing star in the number one on your telephone keypad again, not a star one.
For just a moment.
The first question will come from the line.
Okay.
Right.
Hey, guys. This is due on behalf of come out.
A couple of questions. All the first one is it seems that you're filing today mentioned, so when people Edwards chain language.
I don't know liquidity issues and I just wanted to understand it's going to elaborate on how you're thinking about oh weeping or obligation going forward and though the second follow up as I don't be Q2 embedded on top line.
How should think about that and going forward you Wanna be chagrin Blaze restriction is down that will be from social distancing for the foreseeable future. So.
Due to think about this.
Recovery for the rest of Greenway looking work.
I tell you what I'll try and do you want to go first and then I'll pick up on revenue.
Perfect that's exactly I wouldn't say William Thank you <unk> when I think about the language, you're referring to I kinda like the first focus on we do make a statement about how you feel about liquidity for the next 12 months and you're comfortable that we have sufficient liquidity.
I think the cautionary language you see Wow.
New and this filing a won't be uncommon for companies that are impacted by October 19, and so it is it is additional language. Its cautionary language I don't think it will be on common, but I don't want I don't want it to replace the importance of the statement that we've made in our filed.
And also on this call that we think we've done a the things we need to do to meet our obligations for the next 12 months and we'll continue to try to improve upon that we we understand the value of liquidity events and we'll do everything we can to make sure that that we have it so I wouldn't I wouldn't focus on additional language. There's nothing you know meant in terms of signaling.
The inclusion of it it's cautionary language and I would I would take it in balance with the other statements we've made.
Well you know that you talk a little bit about the second part of the question.
Yes, thanks, and thanks, that's it for the question I mean I think.
As we look into Q2 and as we start to see some of the.
Some of the locked down being lifted.
The clearly is offensive, though our audiences are returning to to the street and therefore.
Oh signs in Abu Dhabi are getting getting visibility from up from our customers, but I think what is impossible to say at the moment. It went oh audiences wealth. They are returning whether they are going to be that.
In the same strength that they were immediately before lock died and I think we see very different situation. They in different parts of the world and frankly in different parts of the U.S.
So I think Brian who who lives in Texas would probably say things that are returning to normal pretty quickly I think if you lived in New York City, you wouldn't be saying that internally you're right. It is returning to a kind of normality, London definitely and they are very very picture across the world.
And well to our audiences.
For our Billboards and I'll sign to set and you're returning I think it's going to take some time before you would say had returned to normal.
That's one side of it the other side of it a weather advertisers are gonna be returning to advertising spend.
As quickly as perhaps we would wish because there is no doubt the the damage to the global economy coolest by by the not Dan has been pretty significant and again of course it varies market by market, but I think what I said earlier in the in the prepared remarks I would just repeat.
Right that we are monitoring this on a daily basis, we are keeping a very very close eye on a pipeline and we are adjusting our cost base accordingly.
Got it thank you.
Thanks.
Our next question will come from the line up obviously with JP Morgan.
[noise] Ah. Thank you good morning, Oh, I've got a couple of here.
And I apologize I had been in are now because the super busy earnings morning, and I hope, you're all staying healthy and well with that I can you remind us of the transit versus non split in your two major reporting segments now and do you think.
Trends in particularly airports will perform materially worse than the traditional Billboard business. Thanks, when I got a few more.
Thanks, Avi answer the questions.
Brian do you have do we have the splits trying to the nonsense it by by Division do we.
Provided no not there is some disclosure in the 10-K, we don't updated into 10 kids or you can look and see you know in terms of the overall business, what though what the split is I think what might be helpful is it's Scott talks a little bit about the airports and which is the most significant.
On a non Billboard activity in the U.S. and then you can speak a little bit to today, you know the trains and as a proportion of the business you know in general terms, but for specific Savi I refer you back to the to the 10-K.
Yeah, It's Scott here Thanks, Brian.
Airports is less than 20% of the of the U.S., we've disclosed that in in a prior roadshow documents with things like that.
As far as its performance.
Has actually held up.
Pretty pretty Resiliently, I mean, you're you're comparing it to a very difficult situation across all but I would not think of airports as catastrophic relative to the challenges that we're facing and other another inventory I think the thing you're going to see in that business is that it.
We'll be probably the last part of our business that that snaps back.
Aggressively because of the hit on audiences, but because that is very premium inventory with a premium audience that is still moving through the airports, albeit with with our levels than than historically. It has it has held up reasonably well.
Thank you that's great and then on the 100 million of cost cuts and again, if you mentioned some of this you tell I apologize, but can you flesh out a the sources of where that's coming from and maybe related Lee.
Discuss progress with Leaseholders, landlords et cetera, and Oh forbearance. Thank you.
Well I can speak to the main categories, and then I'll turn it over to the to Scott and William for the the color Yeah. The site lease expenses is our largest cost category.
Over 50%.
Our operating expense them in the majority of which is fixed and so.
In order to be impactful you have to focus on your your leases. The company has done that and we we started very early in Europe, because we were hit their first and so Oh I'll, let William and Scott talk about progress. The next largest operating expenses is.
It's human capital compensation expense, and we've talked a little bit about that so both those are significant portions 100 million.
In addition to that you know we should also talk about discretionary expenses.
And you know in this time period, we can be you know very focused on on certain categories and we are so those are those three main buckets. They would comprise most of the 100 million I think with respect to site lease. The most important one we can provide a little extra color.
Think we provide a lot of color on capex, so not on the expense side, but to the extent that is discretionary capex or something that can be deferred very focused on it.
There are certain investments will continue to make because they they do make sense, but as you can see from the dramatic.
Decline in capital expenditures were taking it very serious.
Women Scott did you will have additional comments you want to make maybe on the.
Tightly and the compensation expense.
Sure Scott you want to go first the for Americas, and then I'll make some European comment as well.
Absolutely. Thanks, William So the we have we have thousands of landlords and the process of engaging is one do you need to do kind of landlord by landlord, we can send bulk letters out to initiate the process.
But these are all bespoke individual negotiations I would tell you that we are seeing good partnership with our municipal.
Lease portfolio I'm pretty much across the board odd because this is a government inflicted challenge to a degree obviously not the not the virus, but the shutdowns.
The governments are taking accountability for having done that and are working with us.
The private landlords process. They obviously are you know not accountable in the same way and are facing this challenge across their their portfolios and we are working with them. We are seeing success, but it is slower and because of the distributed nature of it.
That's one of the reasons why we did.
Salary reductions and furloughs and things along those lines that were able to see savings immediately on because the slightly says a much bigger part of our expenses, but there's a lead time to getting it.
But we're we're seeing success really across the board and I think we're going to be taking a substantial cost out in that in that area Lynn.
Yeah, Let me just that a couple of things on the on on this and then I think on the on the site lease point and and much of what Scott is that absolutely applies a in rest of world as well.
And the trying to say that I think all landlords would be surprised if we were not negotiating at this stage you'll renegotiating at this stage and that is absolutely the expectation and the conversations that we're having as Scott said across thousands of line load the growth across the world those conversations are being.
And being productive and collaborative because we as we work across that process.
The other thing I wanted to say was the the speed with which needed across our businesses pivoted to this price. That's a renegotiation was was truly remarkable an impressive.
And I think that the impact that we've been able to deliver in the second quarter of the target that we talked about it but it's 100 million dollar savings in the quarter on Opex I think thats, a very impressive response to this crisis.
[noise] appreciate those comments, thank you I'll I'll, let it here.
Appreciate the time.
Hi, Brian you touched on the menu digital liquidity options I think it's true maybe unsecured.
I want to make sure that correctly and then.
With flat out of the I guess other segment now and I've been around when it's been everywhere. At this company you should we think about data catch up for sale in another liquidity lever and with that I'll turn it over thank you all for the time.
Yeah, you well the move to Latin America to to the other segment. It was was driven really by how our chief operating decision maker Williams manages the business and and.
In consultation with our auditors I think we kind of realigned everything so it's not specifically tied to any view on our feelings for an asset monetizations.
That being said I know William have spoken on on prior calls about focusing on.
The higher margin businesses.
Yeah, I don't think it's any secret our U.S. portfolio of businesses.
All the higher margin businesses, our core Billboard businesses, our digital Billboards well very high margin.
And we have expressed and openness with respect to you know kind of the non.
Higher margin businesses, we yeah, we've entered into an agreement to sell our interest in China.
A lot of people have taken that comment really to mean, our European assets.
But I wouldn't you know I would put Latin American what bucket as well so again, there's not a for sale sign up for Latin America, but we operate in four countries.
No they are successful businesses, but I wouldn't call than core.
To our operations and I would not put them into higher margin tie category, so while while I wouldn't.
Say this movement into other.
As an indication.
That.
That we haven't changed our view with respect to those assets I do think that we've made other statements that that do indicate.
Out how we're thinking about high margin versus the non high margin businesses.
If that was helpful to you.
Well where did it as always thank you all stay healthy I appreciate the time.
Hi, Thanks, Harvey Thanks, a lot.
Next question will come from the line as Stephen call with Wells Fargo.
Thank you I'm, sorry, if I missed some of these answers, but maybe just first on M&A you Gotta deal done in China, and I think we were all kind of surprised and impressed by the ability to do that and these volatile times and maybe in retrospect. It seems like China was starting to trend towards reopening and that probably provided here your.
Fire with somebody the clarity that they needed. So if we start to think about Europe, along those lines can you give us offensive, maybe where you think you are in the reopening process in some of your major markets and you know maybe help US just think about what the M&A environment might look like in those markets and whether you know potential buyers feel like they have any lineup.
Not yet maybe as it compares to the pace of where things have gone in China. They have a follow up thanks.
Okay. Thank you and thanks to the thanks to the question and thanks to the I'm.
The comments on the on the China sale, and which I think was that was a positive outcome for everybody.
In in terms of the the reopening of Europe.
I would say it is truly literally very early days.
I mean, as I mentioned that being some opening up in Switzerland.
There's been some relaxing of the the route in Italy.
Some relaxing in Spain in the UK, we're expecting an announcement from a prime minute the on Sunday.
On front as an item that kind of program all.
Stages relaxation of the rules.
There is no there is no saying that a switch is being linked and an market the suddenly returning to normal.
At the moment.
So I think it would be really too early to say that there are any signs of recovery yet within the European markets.
I don't understand downbeat, Abaxis I'm very optimistic about the strength of our medium.
The momentum that we have in the business and I do believe that went through audiences start returning to the street.
We will be in a in a very good position, particularly with the increased volume of digital inventory that we have a I think we'll be in a very good position to to bring to bring revenues back.
But in terms of M&A I would absolutely stand by the that statement that we made in February but we will.
We will actively evaluate.
All opportunities to enable us to support the great into higher margin businesses, particularly in the U.S.
But there is no indication at the moment that the market in in Europe are returning to normal community that makes M&A more challenging.
Great and then just a follow up on the cost initiatives that you outlined to maybe what sort of paced couldn't we expect that hundred million of run rate to start to kick in like could we see that being realized by the end of the second quarter does it take a little longer term roll all of that through and when I'm kinda.
Getting out with all of that's where I think a lot of investors are wondering if you have a lot of cash on the balance sheet after which I'll get from clear channel clear media limited and you're taking these costs initiative that should give you some runway to go through a tough environment and burn a little cash in the short term when you kind of do your conservative modeling.
You know I guess, just how worried are you about that runway or do you really feel like you have ample liquidity unless this downturn is very very prolonged thanks.
So a couple of pieces to that question and it's a good question. It's actually you know kind of the question.
So from from a liquidity standpoint, I do think we we feel like running.
A reasonable position as I think I answered on an earlier question, we actually make a statement that we were comfortable with our liquidity position for the next 12 months.
That being said, there's just such a lack of visibility and you know the operating profile of the company and and this could be more prolonged than we expected. It you could get the virus behind you, but then yards are your how badly we are your customers impacted and how quickly do they come back. So I don't think you can have too much.
Acquitted in this environment.
That's why we did implement and focus very intently on on the cost savings initiatives that that 100 million dollar number is what we expect to a chain in Q2.
And I think as we move forward and get more visibility into both the severity and the link.
Of that's kind of the impact of stem pandemic.
We will have to continue to adjust that cost base to match. The operating performance. So you know I think we've we've done what we feel like we need to do today, but the book is in close we need to can you continued to remain focused make sure that we aligned our cost base with the business and continue to look for additional opportunities.
Again, I think you know we feel good about the liquidity today, but the books not close we're going to continue to look at opportunities to increase liquidity.
And make sure that the the the expense space of the business is rightsized Paul for the operations.
Scott William I didn't know if you have anything else to add but that's that's how I would respond.
I think it's a very good on that.
And maybe just the last one then on that Brian is I assume that there are additional levers you could pull on Capex. If you reassess the environment you know at a at a later time.
I I know I think there's additional levers in opex and Capex should the environment continue to you know persist.
Instead of Furloughing employees, you May you know to make a permanent decision in certain cases.
Instead of deferring you know a lease benefits you may have to completely realign the cost or defer them further out.
On the Capex side, you you may just stop doing anything other than what you actually have to do for the safety of your employees. So.
I think we've taken the costs will we feel or appropriate at this point in time.
But yes, we can always you know if we need to adjust we could oh, we also want to remain flexible so so that if.
Things to do start to come back we haven't made costa impair our ability to recover so a lot of it really is decided by our visibility in everyday that goes by weaker goes by we learn more and we want to remain flexible to to adjust to what we're seeing.
Great. Thank you.
Thanks, Steve.
Our next question will come from the line.
Okay.
Hi, guys. Thanks for taking my questions most of them actually been answered.
But but perhaps just back on the efforts to negotiate with your landlords and you mentioned that you've got thousands of them.
You know the 100 million of cost savings for the second quarter, you're just to what extent does that depend on.
Additional lease negotiations that you haven't yet gotten done or is that hundred million sort of represent changes that as we sit here today in early may have already been put into place.
A follow up.
So let me go first on that I mean, I would say we are we are very confident of achieving the target that we set out today. If we went competent in setting that that hundred million target in terms of the savings could of course.
We wouldn't put it out that.
We are still in very active negotiations with.
They thousands of landlords that we talked about.
But we believe that that saving is achievable.
Okay. Thanks, and then just to sort of to follow up on that where do you have already been successful. How did you to find success. I mean are these reductions sort of proportionate with the revenue reductions are they true discounts for are you currently the lease expense into subsequent periods.
You know any color on that would also be helpful. Thank you.
Yeah, I mean, I think there's a range of ounces to that question and none of them are entirely.
Precise we are negotiating hard on the fixed sites.
The fixed nice cost expenses, we are seeking to convert those minimal minimum annual guarantees that we talked about area converting those from fixed to variable there that they reflect the the change revenue environment that we are operating.
And that goes through a very significant differences in terms of the kinds of negotiations that we have with municipalities.
Buses with with with private line load. So I think success comes in in different ways and each one each contract.
During the eight you know a different set of challenges and opportunities as as we go into those renegotiation. So there isn't there isn't a kind of one side on that question I don't think.
Got you want to add anything from that.
No exercise.
I agree with your William I think it is it is absolutely a mixture of all those and you know where where there is a a contract that has a substantial fixed portion and then a variable portion we are trying to turn it to variable, but that is not the majority of the U.S. revenue at least I'm not sure how that would stack up around.
The world, but.
We do that winters, and where we variablize, where we can but that's you know a minority of our are.
Yes.
Yes, thanks, guys.
Thank you answer thank you.
Our next question will come from line of Stephens.
Yes.
Good morning, Thanks for all the color guys.
I know, it's really hard to kind of look into the current environment and kind of see things as they develop.
New York Times today said that they're expecting revenue declines on the advertising side of 50% I think broadcast TV is anywhere between 30 and 40 from this morning's releases can you give us any quantification at all as to where in that range, you might expect and up from second quarter.
I I honestly feel that every day I read a different full cost from a from a different journalist still from a different consultancy fun and everyday that different and the on its truth is nobody knows they really don't I didn't see how they can though given that we didn't even yet.
No what the what the timing of the end to the of the look down into different state go different countries.
Going to be and we don't yet have any real sense of what the damage to the economies are going to be and we don't yet know how advertise is going to respond to that there will be some advertisers who will learn from previous downturns that it's.
The why this thing is to continue to support that brands and continue to advertise there will be others, who retrench income that budget, but the truth is nobody knows at the moment. That's why we are as I said being vigilant and keeping a daily ironed out pipeline.
ER as I said, you know to an earlier question you know in some cases, the all signs of a positive pipeline building as things return to normal, but it's way too early to call. It a number for Q2 I'm afraid.
Understood. Thanks, so much outright.
I wish I could be more helpful.
[laughter].
An unprecedented environment. Thanks, so much for all the color you guys gave and that's what.
Thanks, Stephanie.
Next question will come from Jim Goss with Barrington Research.
Oh, Thanks, I've got a couple also you have given a lot of color, especially in terms of the European markets.
And which ones are coming back sooner or later or have you or is there anything you can say about the key domestic markets in terms of the importance to your relative to.
How that mix the in this on even opening.
To match up with your.
Business.
So I'll take that Oh, yeah, thanks, laying off I'll take a I'll take a run it that you know we are a large de M.A.
Business, we are experiencing this Williams said this in the the upfront comments as a pretty diverse.
Experience, it's it's challenged across the country, but we have a very strong business in Florida very strong business in Texas very strong business in the southwest all of those regions have been impacted less than the coast.
Then the mid west as sort of in sort of in between and so as we look to things building back. The two variables. William described earlier are exactly the critical ones variable one is the bill back of audience.
Which in those markets the car culture in the United States is such that it's not like our audiences went to zero. During this not even not even close on and that's something that we've actually been able to keep a pretty good island with our radar toward we've been able to engage customers on a on how that has.
Played out and how it's starting to build back and we've had a couple of weeks of audiences building back across the country, but particularly in those stronger areas that I talked about.
The second part of it as William said is how much fundamental damage has been done.
To our customer base and I don't think we're going to know the answer to that for for sometime now as as we work through this but we are a very local intensive advertising medium.
And we're you know working very closely to support our advertising partners, but it's it's really it's really hard to know how to snap backs going to happen, but the the downturn.
What's not uniform across the country. That's for sure does that answer your question.
Oh, yeah that gets to some of that.
And.
Maybe a couple of other things.
M&A youve talked about potential sales or maybe even some tuck ins I.
I would imagine there are some challenge smaller players who might be receptive to.
Potential sale is there something you're pretty actively exploring right now to none of the to certain markets.
Yes.
Well I think I think right now our focus is on on liquidity and men and the current environment.
It may be challenging to make that type of investment.
That being said.
If if the right opportunity came along I think we certainly want to take a look at it.
But again, it's got a it's got to ship within you know what what we're seeing an experiencing and I now we're just challenged with a lack of visibility. So I would I would never say never but I think right now where.
We're focused on building liquidity and so I think like many others would have to look very hard it at what kind of benefit.
You know any type of tuck in or M&A opportunity really brings to the table.
Okay, and one final one sort of a blue sky one.
We've seen broadcasts where there's no meetings for zoom broadcast from homes and that's sort of thing are there any other use cases for sort of home displays that you've started to think about this and the crisis.
Well I think what we've learnt in the last few weeks is that the the value of a about inventory has been very significant in terms of being able to deliver the messages around safety around the spread to the of the virus.
In different markets and ensuring that we keep keep up a public informed so I think we have learnt to be very flexible and we'd love the value of all of our inventory intensive getting messages across.
I didn't think has anything more that I can say, though in terms of how do we see the future at the moment.
Okay, well, thank you very much.
Thank you and thank you everybody for joining this call. This morning. We appreciate your interest in your support during this extraordinary period in in a global history. So thanks to everybody for joining and.
They say thanks.
This does conclude today's conference call. We thank you for your participation enough that you. Please disconnect your lines.
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