Q1 2021 Clear Channel Outdoor Holdings Inc Earnings Call
Yes.
Ladies and gentlemen, thank you for standing by.
Welcome to the clear Channel Outdoor Holdings, Inc. First quarter 2021 earnings conference call.
At this time all participants are in a listen only mode.
Later, you will have the opportunity to ask questions. During the question and answer session.
You may registered ask a question at any time by pressing the star and one on your Touchtone phone.
Please note this call maybe recorded and I will now turn the conference over to your host Eileen Mclaughlin.
President of Investor Relations. Please go ahead.
Good morning, and thank you for joining clear channel outdoor holdings 2021 first quarter earnings call on the call today are William Echo share Chief Executive 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 first quarter.
2021 operating performance of clear Channel Outdoor Holdings, Inc, and clear channel International BV After an introduction and a review of our results. We'll open up the line for question and Scott Wells, Chief Executive Officer of clear channel outdoor Americas will participate in the Q&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 the performance and represents 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 expectations. Please review the statements of risks contained in our earnings per.
Release and filings with the SEC during today's call. We will provide certain performance measures. The do not to confront the generally accepted accounting principles. We provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of the earnings press release and the earnings conference call presentation, which can be found in the financial.
Section of our website investor Dot clear channel Dot 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 and non cash compensation expense items as well as segment revenue and adjusted EBITDA among other important information for the.
That reason, we ask that you view each side 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 May 10, 2021, and may no longer be accurate at the time of the replay with that please turn to page three of the presentation and I will now turn the call over to William F of share.
Good morning, everyone and thank you for taking the time to join today's call.
During the first quarter, we continued to execute on our strategic plan with the goal of maximizing our near term performance, while strengthening our ability to capture an increasing amount of advertising dollars. The global recovery takes hold.
First quarter revenue results were in line with the guidance, we previously provided and for our American segment reflected the tough comparison against the strong performance in the past three months from 2020, which was the only minimally impacted by COVID-19.
We delivered consolidated revenue of $371 million.
32% compared to the prior year ex COVID-19 in China and the FX.
Brian will walk you through the details of our first quarter performance following my remarks.
Looking ahead, we remain encouraged by the progress being made with regard to the vaccination price deck and the increasing levels of mobility across many of our markets as well as the positive sentiment we are hearing amount of advertising.
As expected we are now seeing our business returned to year over year revenue growth through the balance of the year driven by the rebound in several markets.
Most important as a result of the strategic investments, we're making in our business.
And if we are now in a stronger position to drive revenue growth.
It will recovery gains traction.
These investments are primarily centered strengthening our ability to monetize our growing digital platform as well as operating cash debt and elevate our value proposition amongst the broader universe of advertising.
Specifically, we continue to expand and integrate all of radar suite of data analytics products into our portfolio, while strategically increasing our presence in the programmatic space.
We continue to deliver greater and more valuable set of actionable insights of emphasizes while emphasizing selling creative ideas targeting specific audiences.
Put another way we are broadening our discussions with thought beyond just the locations of our outdoor footprint to the value of specific audiences, we reach with these assets.
<unk> has provided us the ability to demonstrate the usefulness of our data.
See Magellan has changed the agencies and brands seek to reach them in a seamless manner.
As we focus on strengthening our ability to drive revenue growth. We are also remain diligent in managing our costs from cash flow.
Brian will provide an update on our cost savings initiatives.
Now let me provide a brief update on each of our business segments, beginning with Americas.
Based on the information we have for the second quarter, we expect Americas revenue to be between $2 65, and $2 $75 million with adjusted.
EBITDA margin improving sequentially from the first quarter.
Entering may we are seeing a notable uptick in bookings of advertisers become more comfortable with the prospect for more sustained opening of the economy as the vaccination rates improve.
Based on our data we can see that audiences are increasingly asking the bad because the recovery unfolds.
But there remains some lag between emerging and the ability of patents in that purchasing.
Primary attribute this to the fact that some key categories such as the amusements and restaurants remain challenged due to capacity the restrictions, but we believe they will pick up as the year progresses and restrictions are lifted.
Further while our transit business is seeing some improvement it continues to lag in the recovery price debt, which is weighing on our performance.
Comprised primarily of Apple this business is well positioned to benefit as travel volume increases.
Looking ahead, we are continuing to see an increase in the number and value of RFP.
Categories, showing particular strength include beverage in insurance and business services.
We're also beginning to see an upturn in theatrical and the the current quarter, which is a welcome sign related to the progress of the opening of the economy.
An example of the big opportunities centered on maximizing the opening of the economy is reflected in our recently announced partnership with the resorts World Las Vegas.
In conjunction with the opening of the result of the summer and the return of convention activity. We launched three full motion digital out of home displays offering advertisers the premium visibility on the Vegas strip.
Include the latest and cutting edge digital signage and represent one of the largest exterior led the.
Building displays in the U S delivering over 135000 square feet of digital signage.
With regards of our technology investments, we added 14, new digital Billboards in the first quarter given the total of more than 1400 digital billboards across the United States.
We also continue to strengthen our radar platform through partnerships aimed at further improving our data analytics and measuring the impact of our assets on conceive of decision making.
We have strengthened our leading audience attribution solution radar proof by partnering with <unk>, the leading real time data solutions company for omni channel attribution and measurement.
Our innovative combined offering helps brands better understand out of home at the.
The size and its impact on key metrics, such as user engagement website visits and app download.
This is the kind of compelling data that is enabling us to demonstrate the power of our platform and influencing consumers on the move.
We're also continuing to make notable progress in the programmatic space.
From programmatic increased year over year in the first quarter will be a jump of small base.
Through integration with multiple SSP, our digital AD units are increasingly accessible for digital buyers by the <unk>.
<unk> buy side platform that they utilize the spend that considerable digital budget.
And while it's still early in our programmatic expansion the progress, we're making bodes well for the future.
Turning to our business in Europe based on the information we have today, we expect second quarter segment revenue to be between 200 $220 million ex.
The impact of foreign exchange.
As in the Americas, the pace of recovery varies across Europe, driven by differing rates of vaccination in bearings and attitude for the virus in different parts of the continent.
While some of our European markets are picking up momentum in terms of opening up we're also continuing to see volatility with activities of different from country to country.
In our largest market from the French government instituted additional mobility restrictions at the end of March following an increase in virus cases on concerns of the new Varian delaying the onset of the recovery from the middle of the second quarter.
The restrictions have started to ease with old school is not open of nonessential retail true to reopen on May 19.
Meanwhile, we are continuing to see promising signs in some of other market, particularly in the U K, our second largest market by the phase III opening is well underway supported by a countrywide vaccination rate exceeding 50%.
Over the last six weeks, our UK business generated bookings ahead of the comparable period in 2019.
As we benefit from pent up demand among advertisers.
Our UK business continued to benefit from the premium locations of our roadside inventory as well as the widespread scale audience reach of our digital networks.
I am proud to also note. The UK team was recently awarded commercial team of the year of the coveted campaign Media Awards the.
The judges recognized clear channel's outstanding performance linked to proactive program focused on supporting advertisers through the unprecedented challenges presented by the pandemic.
Looking at the rest of Europe. Other countries that are progressing well in terms of opening up in Switzerland, and Spain as the.
For the U K, we're seeing advertising spend recovering in these markets as the infection rates drop and restrictions are eased.
So overall sentiment among European advertisers is very positive, reflecting the pent up demand and the need to get in front of consumers.
As with the rebound we saw as you can see in the third quarter of last year. Following the easing of restrictions, which proved to be temporary we believe the AG market will rebound again as the <unk>.
Fictions of waived in additional markets in the months ahead.
Our digital footprint continues to expand in Europe. We added 355 digital displays in the first quarter for a total of over 16500 screens now lives simple.
These assets are radar rollout continues to receive positive customer traction in Spain and the UK.
We're also testing radar in Sweden ahead of the launch in the current quarter with additional launches I'm, Chuck thereafter in France and Belgium.
We're continuing to rollout how programmatic offering in Europe. We recently launched the branded programmatic proposition called clear channel launch pad, which will serve as the customer gateway connecting our premium digital out of home inventory.
<unk> and digital buying platform.
Moving out of home into the omni channel buying ecosystem.
Clear channel launch pad is now live in the UK, Switzerland, Spain, Finland, the Netherlands with plans underway to introduce it across from Italy, Belgium and Scandinavia.
Similar to the Americas, our programmatic platform in Europe will build overtime, simplifying the buying process and providing us with an important avenue to leverage our scale and technology to target new advertising partners.
So in summary, we remain committed to executing on our strategy to expand the revenue potential of our global portfolio and optimize our ability to take full advantage of the economic recovery.
We're not seeing a return to year on year revenue growth in the second quarter with indications pointing to continued improvement and emphasize the demand as the year progresses.
Now I'd like to turn it over to Brian to discuss our first quarter of 2021 financial results.
Thank you William Good morning, everyone and thank you for joining our call.
As William mentioned as expected the quarter has been challenging to the impact of COVID-19 on our business as well as tough comparisons against our strong Q1 2020 performance in Americas. However.
We are beginning to see a rebound in many of our key markets. We arent back to 2019 levels, but it's certainly nice to see the improvement. We are also continuing to work on reducing costs and addressing our capital structure, while investing in our business. So that we are in a stronger position as our business begins to benefit from the improving economic environment.
Before discussing our results I want to remind everyone that during our GAAP results discussion I'll also talk about results adjusted for foreign exchange of non-GAAP measure.
We believe this provides greater comparability on evaluating our performance. Additionally, we have expanded our disclosure to include more detail on America's revenue, including breaking out transit revenue.
We've also added disclosure on site lease expenses in both the Americas and Europe segments.
Moving on for the results on slide four.
In the first quarter consolidated revenue decreased 32, 7% to $371 million.
Adjusting for foreign exchange revenue was down 34, 8%.
If you exclude China and adjusted for foreign exchange the decline in revenue was 31, 7%. These results were in line with expectations.
Consolidated net loss in the first quarter was $333 million compared to a consolidated net loss of $289 million in Q1 of 2020.
Consolidated adjusted EBITDA was negative $33 million in Q1 of 2021 as compared to consolidated adjusted EBITDA of $51 million in Q1 of 2020 <unk>.
Excluding FX consolidated adjusted EBITDA was negative $27 million in Q1 of 2021.
Please turn to slide five quarter view of America's first quarter results.
The Americas segment revenue was $212 million in the first quarter of 2021 gallon 28, 4% compared to the prior year with the decline in revenue across all of our products national was down approximately 33% and local down approximately 25%.
Revenue continues to be under pressure as a result of the impact of COVID-19, but also the decline was a bit higher than Q4 2020 due to the tougher year over year comparisons.
As I noted earlier, the Americas team delivered an exceptional quarter in Q1 of 2020 with eight 5% revenue growth over the prior year.
Direct operating and SG&A expenses were down 21, 1% due in part to lower site lease expenses, which declined 22, 6% to $83 million.
Related to lower revenue and renegotiated fixed site lease expense. Additionally, compensation cost declined due the cost savings initiatives and lower revenue.
Segment, adjusted EBITDA was $64 million down 45% compared to the first quarter of last year.
With an adjusted EBITDA margin of approximately 30%.
Please turn to slide six.
As I just noted we are now breaking out our transit revenue, which is primarily comprised of our airports business.
Transit was down 61, 5% and airports decreased 62, 4% to $20 million.
While Billboard and other was down 27%.
Please turn to slide seven for a bit more detail on Billboard and others Q1 revenue performance.
Print continues to be a bit more resilient than digital and was down 19, 1% with digital down 24, 2% from the first quarter of 2020.
And on the slide eight within transient printed print declined 52, 5% and digital was down 72, 8%.
Next please turn to slide nine and a review of our performance in Europe in the first quarter.
As a reminder of the first quarter is proportionately from the smallest quarter of the year, given the seasonally low low level of of revenue.
Europe revenue of $150 million was down 29, 4% and excluding foreign exchange revenue was down 35, 2% in the first quarter.
As expected the.
The extension of mobility restrictions continued to delay the rebound with the largest revenue reductions occurring in France, the UK, Sweden and Spain.
Digital digital revenue was down 38, 9%, excluding the impact of foreign exchange.
Adjusted direct operating and SG&A expense were down 11, 6% compared to the first quarter of last year, excluding the impact of foreign exchange, both direct operating expenses and SG&A expenses decreased in most countries in which we operate with the largest decrease occurring in France, the U K and Sweden.
The largest drivers of the decline in direct operating expenses was lower site lease expense, which declined 10% to $93 million. After adjusting for foreign exchange. The decline was driven by lower revenue and the renegotiated site lease expense.
Additionally, SG&A expense was down due to lower compensation attributed the lower revenue operating cost savings initiatives and government support and wage subsidies.
Segment, adjusted EBITDA was negative $62 million after adjusting for foreign exchange this compared to negative $14 million in Q1 of 2020.
Our Europe segment consists of the business is operated by <unk>, the IBD and its consolidated subsidiaries Accordingly, the revenue for our Europe segment is the same as the revenue for CIBC.
Europe segment adjusted EBITDA the segment profitability metric reported in our financial statements. It does not include an allocation of CIB the corporate expenses of <unk>.
Adjusted from CCI, DB operating income and adjusted EBITDA.
As discussed above Europe in CCI DB revenue decreased $62 million during the first quarter of 2021 compared to the same period of 2000 $20 million to $150 million.
After adjusting for $12 million impact from movements in foreign exchange rates, Europe, and CCI BV revenue decreased $75 million.
She CIB the operating loss was $100 million in the first quarter of 2021 compared to $46 million in the same period of 2020.
Let's move on to Slide 10 in the quick review of other which includes Latin America. As a reminder of the prior year results include clear media, which was divested in April of 2020.
Latin America revenue was $10 million in the first quarter down $9 million compared to the same period last year due to the impact of COVID-19.
Direct operating expense and SG&A from our Latin American business for $13 million down $3 million compared to the first quarter in the prior year due in part to lower revenue from cost savings initiatives.
Latin America, adjusted EBITDA was a negative $4 million.
Moving on to slide 11, and a review of capital expenditures.
Capital expenditures totaled $18 million in the first quarter of decline of $18 million compared to the prior year period as we continue to focus on preserving liquidity given the current operating conditions. Additionally, Capex was also lower in part due to the sale of clear media.
On the slide 12, Chris Channel <unk> consolidated cash and cash equivalents totaled $642 million as of March 31 2021.
Our debt was $5 6 billion up slightly due to the refinancing of the senior notes.
Cash paid for interest on the debt was $145 million during the first quarter.
Our weighted average cost of debt was five 9% as of March 31 2021.
Moving onto slide 13.
As mentioned, we continue to focus on managing our cost base and strengthening our liquidity and financial flexibility.
In April 2021, we've revised the Europe portion of the international restructuring plan, which we began in the third quarter of 2020, primarily in response to the impact of COVID-19.
We expect this plan to be substantially complete by the end of the first quarter of 2023 and estimate that total charges for the Europe portion of the international restructuring plan, including $10 million of charges already incurred will.
We will be in a range of approximately $51 million to $56 million.
Substantially all charges related to this plan were or are expected to be severance benefits and related costs. We expect the Europe portion of the plan should result in the pre tax annual cost savings in excess of $28 million.
Additionally, we continue to work on negotiating fixed site lease savings and have achieved $23 million of rent abatements and the first quarter on the consolidated basis also we received European governmental support and wage subsidies in response to COVID-19, 5 million in the first quarter.
Moving on to our financial flexibility initiatives as previously announced we successfully completed an offering of $1 billion of 7% and three quarter senior notes due 2028.
We used the net proceeds from the offering to redeem 940 million of our nine in the quarter senior notes due 2024.
Additionally, last week, we entered into a second amendment for the senior secured credit agreement extending the suspension of the springing financial Covenant through December 31 of 2021.
And further delaying the step down until September 30 of 2022.
Turning to slide 14, and our guidance.
For the second quarter of 2021 of Americas segment revenue is expected to be in the range of $265 million to $275 million and adjusted EBITA margin is expected to improve sequentially over the first quarter of 2021.
Our Europe segment revenue is expected to be in the range of $200 million to $220 million, excluding the impact of foreign exchange Adil.
Additionally, we expect cash interest payments of $216 million in the last nine months of 2021 and.
$334 million throughout 2022.
We expect consolidated capital expenditures to be in the $155 million to $165 million range from 2021.
We are optimistic about our prospects and may look to accelerate capex spending as appropriate through the balance of the year commensurate the slope of the recovery.
We anticipate our consolidated revenue in the second half of 2021 to reach nearly 90% of 2019 levels excluding China.
The recovery has led primarily by our Americas Billboard business and a number of countries in Europe, including our UK roadside business.
Lastly, we expect ending liquidity for 2021, including unrestricted cash and availability under the company's revolving credit facilities to be approximately $425 million to $475 million, but that could vary based on timing of cash received sand or payments.
That concludes my formal remarks, and now let me turn the call back over to William.
Thank you Brian.
Looking ahead, we are encouraged by the pace of the vaccination process and the increasing levels of mobility that we're seeing across the majority of our footprint.
The <unk> interest among advertisers is returning and we are seeing booking activity exceeding 2019, and several U S and European market, which bodes well for the year ahead.
We remain focused on strategically investing in technology, including expanding our digital platform and further strengthening our data analytics and programmatic resources with the aim of maximizing the potential of our digital boards.
As we elevate our ability to demonstrate the effectiveness of our assets and influencing consume the decision, making and continuing to make our inventory easier to buy particularly among digital AD buys we will look to expand our revenue growth potential.
As we invest in our technology. We will also continue to take steps to carefully manage our costs and preserve our liquidity as we navigate the evolving macroeconomic climate and focus on driving profitable growth over the long term.
Now, let me turn of the coal to the operating it for the Q&A session.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad again Thats Star then the number one your first question comes from the line of Steven Cahill with Wells Fargo.
Thank you might be on mute Steve.
Sorry about that yes.
So thanks, a lot for the color you talked about the pickup in Rfps and empty Acura call could you give maybe give us a little bit of color on the Americas Division.
Revenue in this division these days as of the large urban the signage large urban areas spectacular that sort of thing because I imagine, that's where youre seeing a lot of this resurgence. So if you could maybe help put some color context around those larger been revenue areas and what sort of trends you're seeing.
And maybe the same question for Europe, and then Brian Thanks for that financial detail maybe.
Maybe if you could dive a little bit deeper into what the covenant holiday means if youre ending liquidity of $4 25 to 475 of which I think I heard right does that put you in compliance with the covenant and does that include maybe some of your bank debt reduction or like revolver payback by at the end of the year. Thanks.
Brian you want me to take the spectacular one first.
Okay. So.
Steve the question about the <unk> the good one.
Just to clarify they do buy.
Spectacular, but thats not the majority of what they what they buy what they actually are big users of our digital networks and by relatively deep into the the.
Foot print and.
So.
I don't think we disclose how big the spectacular businesses, but it's in that bullet and other debt.
It was disclosed.
It is definitely showing signs coming back, but it's not just the Africa all of Thats coming back I hope that that gives you a flavor for it.
Maybe just in that context is large city or sort of large urban area ex transit starting to come back we've seen that from some of our local television companies.
Yes, I mean, I think it's it's a mixed bag across the country, but it definitely is and certainly as we look.
Q2, and beyond we're definitely seeing that I think the the more you go south in the more you go.
Two somewhat smaller locale the.
For robust things are I mean, I think this will be a question of will get so I'll just answer it right now we have.
<unk>.
The third of our markets not a third of our revenue, but a third of our markets.
Trending to be ahead of 2019 this year.
And I think overall.
We're expecting a very strong second half and really second quarter and second half, particularly on the traditional side.
Mhm.
And Steve I think you asked about Europe as well.
I hesitate to generalize.
The recovery in Europe, because it really is very different country by country. If we were just talking about the U K I think we'd be presenting a a very positive picture is as the the bulk of the restrictions are being lifted.
Almost by the day and we're seeing the recovery father of that very closely.
The European markets.
The.
The pandemic has taken longer to two two.
<unk> b to b to be cured as it were.
The restrictions have remained in place for long time.
And so we haven't seen the the speed of recovery that we're seeing in the U K. So it is a very picture what is consistent is that.
Week by week, Lockdowns are being lifted and week by week as the Lockdowns are lifted the revenue comes back and comes back pretty strongly.
It's going to be happening during the second quarter.
That does that recovery is taking place.
So I think what I would say is if you average it out across Europe.
We will continue to be so.
Low may is certainly moving moving more strongly and by June and I think we are expecting to see in pretty much all of our markets for that recovery, taking hold but I think the I would think of the second quarter for Europe as the as a transitional quarter and then looking to a strong sustained recovery.
The into the second half of the vaccination rates increase.
But I would say it is that there's no such thing as one Europe and in the situation.
And Steve I'll jump in and answer the Covenant question quickly I think for.
First I'd like to say, we're pleased to deliver another amendment in.
Certainly reflects the continued support of our bank group, so happy with that the <unk>.
Second thing I'd note is this is inc.
Springing covenant so the only applies if theres outstandings under our cash flow of revolver, which today there is.
But.
But the second and then the means is there really is no.
Covenant, which is a secured leverage test until the end of the year and in return.
We will continue to maintain a minimum liquidity of.
$50 million. So it's the continuation of the first amendment with respect to the secured leverage test.
That test when it is in effect of seven six times.
There is a step down to seven one times.
And consistent with the delay in the application of of.
The financial covenants. The step down is also been delight, hence the delayed till September 30 of 2022, So again pleased to report.
The second amendment and I think it is.
Based on how we feel the recovery is going and we feel that we do have sufficient.
Means to meet that test.
You asked a question about the liquidity guidance and whether or not.
That's sufficient for what that reflects is kind of of the way I took it.
When we provide the liquidity guidance includes cash and availability so.
It doesn't really matter, whether we pay down the revolver or not it would be included whether it's availability on the revolver cash on our balance sheet. We do believe it's sufficient we've worked hard to build up that cash cushion.
We have more visibility today than we did in the past, but we also are very.
Mindful of our liquidity position and we will take additional net measures if appropriate should we need to to make any kind of changes on that front.
So hopefully I addressed your question, let me know if I didn't.
No that's great. Thank you.
Your next question comes from Ben Swinburne with Morgan Stanley.
Hi, good morning.
Right I think that was your comment about the second half of the year apologize if it was somebody else's.
Reaching 90% of.
Of 2019 revenue adjusted for clear I'm, just wondering if you could.
Go back to that and just.
Explain that again, because it was a little bit quick and also if you could give us a little bit of color on how you guys are thinking about.
Of the different parts of your portfolio in the context of that second half.
And then I was just curious maybe for Scott on the programmatic side Whats what are your plans as you move through this year into next year in terms of building that channel out further into the technology investments and whether youre seeing advertisers really pick up even further interest in that channel, including kind of on the on the local side would be <unk>.
Thanks, a lot.
Yeah, So I'll talk a little bit about the the revenue guidance comment and then I'll flip it over to Scott to talk about what they're seeing in the in there.
In the various markets, but the the guidance provided was really to give some comfort based on the slope of the recovery that we're seeing in our business today.
Where we think the business can be at the end of the year with respect of revenue versus 2019, given what we see today and what we what we think will be happening over the second quarter and really the second half as we see recovery in the various parts of our business.
So things could change, but I think given what we're seeing today, we feel a strong recovery.
His insight and by the end of the year, we could be back up to 90%.
The pre COVID-19 levels 2019 levels of.
On the top line.
So hopefully that gives us some indication at a high level of what we're seeing today and hopefully.
You will see that recovery come to fruition.
Scott William color on the operating units.
Yes the.
Programmatic question I'm happy to take the U S portion of it and then volume to the degree of you want to talk about the European we can dive into that as well.
So first off programmatic is coming back very nicely. It is it is performing well and it is performing ahead of 2019 pretty materially.
At this point so it is a true.
Channel that we see advertisers.
Having interest in more broadly in terms of our plans I think you will see us add at least one more SSP, which are sort of the supply side platforms. They are sort of the.
The large scale distribution platforms that give you access the different DSP, which or the demand side platforms thats, what the advertisers actual news.
We currently have a pretty robust mix, but we're always looking to enhance that and we're always looking to to add I think you're also going to see us building.
More and more capability in terms of how we're actually handling the content side.
<unk> of things. So there are investments that we're making in our content management systems.
In other developments that were the.
We're working with along those lines in terms of making our tool set more robust and enable the continued to scale nicely.
As for the question on local we have had a few local customers.
Bye.
Programmatically.
It has not been the primary angle on our business.
But I think as you see the demand side some of the more mainstream demand side.
That forms coming online.
The do a lot of business at that level, I think you'll see us pick up pick up more but that has not been the focal point so far William I don't know if there's anything you'd add on Europe.
No I'd say I.
I think I said right at the start of this year, the programmatic who is going to be a key part of our agenda right across the across the company and what Scott's been doing in the U S. I think has been a model of <unk>.
Growing.
Programmatic capabilities as I've said in the in the script earlier, we would have launched in five major European markets.
Branded programmatic product, which is now as I say in those five key markets. Initially the quota clear channel launch pad, which connect premium digital inventory to ssp's entities of platforms.
And it's a it's an important start Europe's a little bit behind the U S and adopting.
Programmatic at scale, but I am absolutely convinced that within the within the next two to three years, we will see it taking a pretty significant share of our business. So it's an important it's an important step forward.
Thanks, everyone.
Your next question comes from Lance Vitanza with Cowen.
Hi, guys. Thanks for taking the questions I have one for Brian and one for William maybe William we could start with some.
Some of the country by country commentary in Europe, very helpful and I understand that the pace of the restrictions being lifted varies by country to country, but what about the lag between return of audience and return of the AD dollars and generally if I'm hearing you right. It sounds like Youre not really seeing the lag of this time around that feels differ.
And last fall, but did I get that right.
It really depends on how much digital inventory, we have in each in each market. So in the UK, where over 60% of our revenues now comes from digital screens the the.
The recovery is pretty much instant in terms of our revenue once restrictions are lifted so once audiences of back on the street.
The advertisers want to reach them and we can get those straight up onto onto the digital screens.
And then follow on soon after onto traditional inventory in France for instance, where we have significantly less digital inventory that recovery can take a little longer although I would say that if we look back into Q3 of last year when restrictions were lifted in France, we did see revenue.
You coming back pretty fast I mean, not as fast as we would with a stronger digital footprint, but I think that is the main that is the main variable.
I think the other factor to look at is the the clarity of the government.
Signaling of what that plans are in terms of loose.
Loosening up restrictions so I think in the U K, we benefited from a very clear roadmap of <unk>.
Five weekly stages of of the of the opening up.
In Spain, it's been much less clear what the what the process was going to be and in France. I think we would we would say they took a long time before they they reacted they have now reacted and we're not seeing infection rates go down vaccination rates go up and restrictions being lifted.
As I say I'm very optimistic about the the direction of travel I am optimistic about the the speed of recovery once the restrictions are lifted but it does vary a little bit market by market does it help very.
Very much so thank you and then Brian just for you.
Somebody still have $40 million to $45 million of <unk>.
Lcs outstanding and if so presumably that is factored into the liquidity guide.
The other words.
The against what you would otherwise be able to borrow on the revolver or is that right.
That's correct and I actually think we disclose what the availability which would be.
The size of the revolver less any kind of commitments, which would include Lcs.
For the exact amount of maybe a little higher than $25 million, but we are a big LTE user that is backed out because it's not available for liquidity. So it would not be included in the liquidity number.
Okay. Thanks, guys.
Your next question is from Stephan Bisson with Wolfe research.
Good morning, Thanks, so much for any additional color today could you talk a bit the merchants and how they should trend throughout the year and perhaps over the longer term for both Americas and Europe should we be targeting pre pandemic levels or has something changed in the cost structure to push it one way or the other.
I can I can.
I'll take a stab at that and then William and Scott do you want to weigh in dollars respectively.
So look I think margins are coming back we in America as we talked about sequential improvement were a little little early in the recovery in Europe to make that commitment for Q2, but but as the economies start to rebound as Europe starts to the kind of follow in and really get traction in the recovery.
We would expect the margin improvement is there I mean this is a.
The large fixed cost business has a great deal of operating leverage.
Mostly that pull through as the the recovery occurs and if it is not in Q2 for Europe, we would expect it in the second half.
The other part of your question about do we ever expect margins to hit pre COVID-19 levels well the business does change over time and I think that answer is dependent upon the number of things.
We have some positives we've taken out some cost in the business. We continue to take out cost in Europe, It will take a little longer there.
But we are being very diligent and we don't expect all of these costs to come back.
On the other hand of the portfolio does change yes.
If in the future we have more weight in transit number of weighted airports or more capital city contracts, which have lower margins that could change the overall margin profile.
And we do have do have some of that business mix differs.
The differential right now and so I wouldn't expect that when revenue is getting back. The 2019 levels you should assume margins would be at the same point, it's going to reflect some of the underlying changes in the business, but by and large incremental dollars to this business will fall through.
And we're encouraged that we're starting to see some of that and again I think through the rest of the year, we hope to deliver it.
Scott William I don't know if you had any further color, but that's where I'd start.
Scott do you want to make any comment for the U S.
I mean, I think the only thing I'd.
Just say is that the next several quarters are going to be lumpy.
And that could go in both directions and so.
Whats driving that is we're still in negotiations and still an approval processes on different relief programs and we will start to see some snap backs happen as relief that we got during the worst of the crisis.
Through and so it's.
It's probably not going to be of neat linear.
Path over the next couple of quarters, but I think medium to long term you will see a healthy margin profile.
The reemerge.
Scott I'm glad you mentioned that that's a very fair point my comments on the longer term recoveries was assuming all of the set of unwound I think youre right. The next few quarters due to the lumpiness of some of the deferrals and abatements.
Could be you said could be very lumpy sort of think.
For that.
Yes, so so I wouldn't yes, I was going to use the lumpy word as well I'm afraid.
It applies equally to Europe, it's pretty lumpy the other.
Point I would make for Europe's to Echo Brian's point is.
We have we have made it clear we are going through some pretty significant cost reduction programs in Europe and in some specific European markets as you'll know with some of those European markets.
The reduction programs kind of take time as you go through extensive negotiations. So whilst we are very actively addressing some cost based challenges in Europe. The impact is not going to be instant it's going to take it kind of take some quarters before we really see that.
The margin.
Great. Thanks, so much for the color.
Your next question comes from David Joyce with Barclays.
Yes.
Thank you I was hoping you could provide some more color on the proportion of.
Your advertisers in revenue that arc.
The coming from radar at this point.
Portion of your footprint is enabled and also.
Are you linking with other to what degree are you looking with the other media companies with the <unk>.
Holistic omni channel by program of for your advertisers.
William do you want me to take a run at this for Yep Yep.
Yes.
Sure. So in the U S of 100% of our footprint is radar enable and.
It's very hard to actually answer your question because radar is not.
It's not something that the client buys its a service that goes alongside what they're buying and so of client might use radar in many of our clients. At this point are using radar to do their planning, but they might not do an attribution study they might not sell any other media through our radar.
<unk> tool.
It might not embed our data on the other hand adverts.
Advertisers might.
Do all through all four of our radar products.
Here in the U S. So we don't we don't really measure it by.
What percent of our revenue.
Goes goes through it.
And let me, let me speak to the omni channel because I think I think there could be.
Two ways to answer that question I think being one.
Would be that.
We do when we do radar studies, we do include analytics for all of the out of home that's being used not not just ours.
But I don't think thats necessarily what you meant by by Omni channel I think youre thinking of omni channel the Sps.
So of programmatic.
That process and you can clarify for me when I when I give you this border, but as well.
But omni channel DSP are relatively recent to out of home programmatic. They are absolutely of growth channel and we are definitely seeing advertisers, including out of home in their digital campaigns, where they might be buying other digital advertising products, along with digital out of home.
The the work.
Space for these omni channel. The Sps includes quick boxes, where they can add digital out of home alongside display ads or search or other things like that.
But that is still the minority of our programmatic revenue at this point, it's something that we think has huge promise, but it is it's an emerging channel. So hopefully that addresses your questions.
Yes.
The comments were all just for the U S correct.
Yes, yes.
And if you just if you take Europe radar, we launched radar in just the U K and Spain, just the last year.
We are looking to roll out the product into other European markets. Later, this year, but again to Scott's point, we use it as a as the market indicator of audience and of the at the audience travel patterns and so use it to demonstrate to advertisers the audiences that they can reach through a collection of.
The network of boards of screens.
But it doesn't relate to a specific advertise the campaign in general.
Okay. Thanks.
The second question if you could please clarify.
When things normalize in 2022 or 23.
Will the margins be higher due to various cost cuts or will the revenue the revenue mix shifts.
Your differential making the make the margin comparisons were difficult from pre COVID-19.
Yes, I don't think we know the answer to that I think we are achieving cost savings and we think some of those will stay in obviously as of the business grows we'll have to reevaluate it and that is that as tailwind.
At the same time, we're made up of the portfolio of contracts and we will continue to go after profitable contracts that can shift over time, if we get into more transit.
That can change the business mix. So I don't know that we know the answer.
I think we will continue to focus on.
Moving margins of the best we can but at the end of the day, we want to generate positive incremental positive free cash flow and we will manage the portfolio as we think is accretive and the most accretive to shareholder value.
And if I could just understand better the renegotiated.
Right.
The contracts are those type.
For Aerie abatements of temporary changes like do they come back with you with with prior levels of revenue like the.
How should we think about the cadence.
Well it's.
It's the mix.
You start with COVID-19 impact was the greatest <unk>, you started with deferring payments on everything and trigger the negotiations, it's unprecedented times, our counterparties largely realized that as well and sometimes those deferrals.
Turning to abatements, sometimes youre of government support behind it sometimes youre dealing of private landlords and it's and it's more of a discussion and maybe it is of deferral and ultimately it will have to be paid out, but theres a wide spectrum of.
Of discussions and these are ongoing so I think that once we once we.
Confirm that's something as a permanent abatement.
We disclosed that.
And everything else is a deferral of it hasnt been paid some of those deferrals could flip into abatement of some of those will be deferred and ultimately unwind as the recovery continues so it's a mixed bag.
And we do disclose separately the.
The site lease abatements.
Got me in the quarter and all of last year.
And so hopefully that gives you some color on the <unk>.
Lease negotiations with the Big initiative of the operators have done a great job and.
And they'll continue to do what they can as long as for the businesses negatively impacted by COVID-19.
Okay, great. Thank you very much.
Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad Thats Star. One. Your next question comes from Avi Steiner the Jpmorgan.
Thank you and good morning, and thank you for squeezing me in quick for you here.
Domestic travel seems to be coming back based on TSA numbers I'm curious how important is it for the company the business travel returns versus what seems like personal and then if you could just remind us on the lag time.
On the airports business between the higher level of travel and revenue coming back to historical levels and then I've got a couple of more thank you.
Sure. Thanks Avi.
Youre, absolutely right travel is coming back nicely.
Sure.
The business travel is what historically the majority of.
Airport advertising.
Anchored on.
But as we've gone through the crisis, we've actually engaged a lot of advertisers who are not.
Sort of beat of be oriented and so we're we're going through a bit of a portfolio.
Mix shift I think the way I would answer your question is that it will definitely be important for us to have.
International travel in particular.
The start to start to reemerge, because the international terminals tend to be some of your most premium.
Inventory, whether whether for business or for consumer oriented products.
Business travel as a whole I don't think needs to get back to the same level.
We had before.
COVID-19 in order for it to be.
Still a very robust audience sort of robust.
Opportunity.
As far as the question on the lag.
I think when you go back and look at last year and now that we're disclosing the information you might you might see this a little bit more clearly on transit.
We didn't see.
The precipitous fall off immediately.
And it's because a lot of the airport contracts are a little bit longer term in orientation, and so you had a little bit of an unwind of that happened and that works in the other direction to that you need to get advertisers to decide that they believe that the return of of the audience is robust and then they need the.
Commit in order to secure locations of secure.
Their positions, we've never gone through anything like this or at least not not in recent history. I think 911 is probably the closest analogy and it was pretty different in terms of the.
The speed and.
Our traffic rebounded and how things work there.
But we really so we really don't know what the lag is going to be but we expect that it will probably be.
Multiple months.
We definitely are seeing advertisers some of the strategic advertisers that really prioritize the airports come back for the second half of this year. So I think our news, it's going to get a lot better as.
As of the year of bills, but.
In terms of the <unk>.
Calling the ball on exactly when we're back to back the run rate I do think it will lag the roadside business bye bye multiple months.
I appreciate the color. Thank you and then.
Brian just on the liquidity comments, which were very helpful.
Just.
For me beyond interest and Capex, how do we think about working capital. Some of these deferrals come back and any other movements in there and then restructuring cash restructuring please.
Yeah.
One of the reasons why we kind of went out and gave a year end liquidity position because I do think we have some swings, particularly in the deferrals, we've got our operators.
Working very hard to defer those payments convert those payments to permanent abatements and then for liquidity purposes between now and kind of normalization, we have to pick periods. When they will hit and so we thought it was important to kind of go out to the end of the year and provide some some liquidity guidance.
And I think we feel given what we see today, we feel pretty good about that range.
Restructuring charges, yes look I think we of the number of things going on if I look at some of the cost savings initiatives largely we have spent and we are benefiting from.
The restructuring initiatives that we've taken in the U S.
Latin America, and a significant amount of the corporate what will take a little longer is the European side and we've provided some some data points on that and it really is a function of the countries that we operate and you're going through the process there, but we do and we've actually revise the program to make it larger and more substantial.
That will take a little bit longer, but I do think from a cash outflow perspective since a lot of that.
Cost is really severance related debt there should be largely in line put another way you won't have a huge amount go out day, one and not receive that until the first quarter of 2023, they should be kind of matched funding from here on out because we have some upfront costs.
But for the most part they should kind of match going forward.
So hopefully thats helpful on the working capital and restructuring side.
Let me know.
Further questions.
That's great and maybe last one.
<unk> heard in a while but I may have just missed it any update on the Los Angeles Billboard market I thought earlier in the year there were some new rules potentially coming out there. So any commentary on the thank you for the time.
I think I'll have you all.
I'll take that one I will take that one as well.
The thing you might have read about was the city planning Commission.
I'd put for their response to.
Some of the the.
<unk> language that the city Council had had drafted.
It's now back into the City Council land use committee.
And.
They are they are working on it.
Wood.
Not hazard, a guess as to when that political process will yield, but I do know that they're working on it it definitely got the prioritized during COVID-19.
We had felt pretty bullish of the early part of last year the.
Things were going to things, we're going to move through and I do think that the city Council is.
Engaged and is very serious about getting an ordinance out that'll that'll work for the industry there, but we don't.
We don't have the timeline, but thats concrete.
I appreciate all the time thank you.
Thanks.
At this time there are no additional questions I will turn it back over to William Echo share for his closing remarks.
Thank you and thank you everybody for joining the call and for.
Supporting us.
During this period I mean, I just wanted to end by saying I think we will look back we will look back on the second quarter of 2021 as the.
As the quarter, where the business turned the corner the pivot quarter. If you like where we went back into growth and we are starting to see the the.
The real recovery from from COVID-19 is clearly dependent upon some factors out of our control.
Whether they're all kind of further for the COVID-19 variance in how vaccine programs run out in different markets around the world, but all of the signs that we are seeing a truly encouraging around businesses ability to bounce back from COVID-19 and just picking up on some of the questions that we've had today.
As those restrictions are lifted and as audience has come back into the into the streets, we do see that recovery coming the day lag varies market by market dependent of based on levels of digital inventory and a bit on specific circumstances, but as I say Q2 is the is the key.
Of course for us as we as we turn that corner and look to the second half of the year to really demonstrate the business back into full into full growth.
Thank you for your support thanks for the great questions and we look forward to talking in the coming weeks and months thanks very much.
Okay.
Thank you. This concludes today's conference call you may now disconnect.
Yes.