Q2 2021 Clear Channel Outdoor Holdings Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the clear Channel Outdoor Holdings, Inc. Second quarter 2021earnings.
From this call at this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you'll need the press star 1 on your telephone if you require any further assistance press Star Zero I would now I'll turn the conference over to your host Eileen Mclaughlin Vice.
<unk> President of Investor Relations. Please go ahead.
Good morning, and thank you for joining clear channel outdoor holdings 2021 second quarter earnings call on the call today are William Ecosphere.
Sir of clear Channel Outdoor Holdings, Inc, and Brian Coleman, Chief Financial Officer of clear Channel Outdoor Inc.
We will provide an overview of the second quarter 2021 operating performance of clear Channel Outdoor Holdings, Inc.
The 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.
We begin I'd like to remind everyone that this conference call includes forward looking statements. These statements include management's expectations beliefs and projections about performance and represent management's current beliefs. There can be no assurance that management's expectations beliefs or projections will be achieved for the actual results will not different from the expectation.
<unk>. Please review the statements of risk contained in our earnings press release and filings with the SEC.
During today's call, we will provide certain performance measures that do not conform to generally accepted accounting principles. We provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP day part of our earnings press release and the earnings call.
Presentation, which can be found in the financial section of our website investor Doc 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 segment revenue adjusted EBITDA and adjust.
Prince call corporate expenses, including the impact of share based compensation and restructuring charges. Among other important information for that reason, we ask that you view each slide as William and Brian comment on them also please note that the information provided on this call speaks only to management's views as of today.
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Adjusted for anyone and May no longer be accurate at the ton of of your play with that please turn to page 3 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.
Pleased to report the we're seeing of substantially.
Thanks will rebound in our business.
In the second quarter, but into the balance of the year with strength in the top line and improve profitability.
With advertisers returning we believe we're in a stronger position to capitalize on the great potential of our out of home platform, including continued investments in technology to drive growth in our higher margin market.
Particularly in the Americas, while maintaining our financial flexibility and objective to delever, the balance sheet and unlock shareholder value.
With the business showing clear signs of recovery.
Sides of that now is the right time to implement our succession plan for me to transition from the operational leadership of the company.
All of the assuming the new role of Executive Vice Chairman starting January of 2022, and will be supporting the management transition and leading the strategic M&A activity and our ongoing efforts to optimize our portfolio.
I'm also delighted to announce the Scott wells will take over as CEO, while continuing in his current.
Role of CEO of trade channel outdoor Americas, and he will join me on the CPO Board.
Governor line of work together in a variety of growth the started into the channel. When he was an operating partner of Bain capital of form of PE sponsor.
I know that many of you on this call without the misuse of.
Speaks of Scott.
Of our Americas business and are familiar with his deep knowledge of our business and he and his team delivered in the Americas Division over the past 7 years.
Scott has outstanding previous experience and a proven track record in leading the Americas segment of technology and data driven transformation strategy for us.
<unk> and strong growth.
Prior to the onset of Covid.
Furthermore, during the pandemic score from these teams have moved quickly to stabilize the business.
And positioning of our Americas business for the strong rebound that is now underway.
Greatly admire OLED cost of the achieved and I look forward to continuing to collaborate with them as we focus on maximizing.
<unk> the performance of the company in this next chapter in our history.
Justin Cochrane the currency of our Europe segment will continue in his role and will join these calls in the future to share the results from the Europe segment.
I would also like to take this time to thank the incredible clear channel team for their dedication.
In hardware in managing through the most difficult business environment.
Other experience.
Our ability to adapt to the quickly changing marketplace has ensured that we are in the best possible position to accelerate our recovery by capitalizing on the increasing demand for our medium as consumers return to the streets.
Moving back now to the review of our business.
We delivered better than anticipated consolidated revenue of $531 million in the second quarter up 63% compared to the prior year, excluding FX in China.
Americas revenue was $272 million up 36%.
The case high end of our guidance and Europe revenue with $247 million.
For 224 million, excluding FX up, 109%, which exceeded our guidance.
Encouragingly, we saw a steady improvement in our top line performance each month as the second quarter progressed well.
We achieved about 70% in 2019 revenue in April 80% in May of 90% in June for our Americas, and Europe segments combined excluding FX.
Moreover, we are continuing to see positive momentum build in our business of the <unk>.
Current in the current quarter as the recovery takes shape of cross.
That's the upfront.
All of our business segments of growing well ahead of last year with some market navigating to either match or exceed 2019 levels.
As a result of the continued strong rebound we're seeing in our business. We're now increasing the revenue guidance for the second half of the year that we previously provided in our Q.
Q1 earnings call for nearly 90% of 95% of 2019 revenue excluding FX in China.
The recovery is across the board led primarily by our digital roadside business.
In short the business is back and we are very excited about the trends, we're seeing and our ability of the.
The capitalize on the recovery underway.
During the Covid crisis, we continued to invest.
We invest in our business, while aggressively addressing our cost structure.
We believe we are emerging from the Covid crisis, with a stronger and more dynamic platform.
Positioning to deliver a broader and more valuable mix of actionable insight.
If the advertisers combined with even greater flexibility and delivering highly targeted campaign at the right time and in the right place.
These investments of energized our organization and they've given us sales teams, even stronger resources to present to new and returning advertisers.
Now let me provide a brief update on each of our business segments, beginning with the Americas.
Americas.
Based on the information we have for the third quarter, we expect Americas revenue to be between 350 million of $325.
With our segment adjusted.
EBITDA margin expected to return close to 2019 levels.
This will put our third quarter revenue performance for the Americas within a few percentage points of our top line performance in the third quarter of 2019.
In the third quarter, we are experiencing notable uptick in demand as momentum.
And bill and advertisers recognize the breadth of the recovery underway and the need to rebuild that campaign refresh that brand and connect with consumers.
The majority of our market the showing considerable improvement driven in large part by our digital business.
We're now seeing a strong rebound in Apple and.
The <unk> such as the La and New York as well as in key verticals that had previously been negatively impacted by the pandemic, including theatrical retail and financial services.
We're continuing to see some name brand advertisers returned to the out of home market after having been gone for years with renewed interest for students.
And in big parts of that recognition of the advancements we've made in our technology, including our radar suite of solutions.
With regards of our technology investments, we deployed 26, new digital billboards in the second quarter, giving us the total of more than 1500 digital billboards across the channel.
We also continue.
To strengthen our radar platform and programmatic solutions to the completion of multiple integrations with our strong base of possible.
These partnerships further elevate our data analytics capabilities and our ability to measure the impact of our asset on consumer reach and decision making.
For example earlier.
Earlier this month in the first part of our industry, we entered into a partnership with for square to provide brands with daily campaign performance metrics across our digital displays.
Using this new solution powered by force squares attribution products, our customers can evaluate and adds performance by geography time of day.
Immigrants and historically the invitation.
Can then use this data to understand consumers exposures of our displays and subsequent visits to retail locations and other points of interest.
This is the kind of offering because of attracting new advertisers to out of home.
We are not static billboards we are of dynamic.
<unk>.
The addressable ecosystem.
Europe.
Turning to our business in Europe based.
Based on the information we have today, we expect third quarter segment revenue to be between $245 million and $255 million, representing about 95% of Europe's.
Europe's top line performance in the third quarter of 2019, excluding FX.
We are very encouraged with the trends we're seeing.
In Q2, all of the all our significant market showed strong improvement for the trading seen earlier in the year and advertise the sentiment remains positive reflecting pent up demand.
On the return of large sporting event supporting our optimism regarding the feature of our business.
Adding to our momentum we are now actively in pursuit of contract tenders, which have begun to open up again in Belgium, we were awarded a 10 year outdoor advertising contracts covering.
On the train station.
The digital screens in more than 46 percentage is currently we ultimately plan to grow our digital presence the 800 screens. They pay for it is more than 100 stations across the country.
In France, we were recently awarded the Street furniture contract for Exxon per Bone, Inc.
In Barcelona.
We renewed the outdoor advertising contract covering the bus stops across the city.
Overall, we now operate 5000 of advertising faces in the bulk of late in the Metropolitan area and expect that the policy of 150 Digital Street furniture units by the year end.
Supporting our ability to take full advantage of the recovery.
Covering our digital footprint continues to expand in Europe. We added 68 digital displays in the second quarter for a total of over 16600 screens now alive.
Building on the strength of our platform our radar rollout has been well received in the UK and Spain and has now been introduced for.
For the audience proximity planning and all of our major European markets.
The introduction of our programmatic offering in Europe Ta channel launch pad has also gone according to plan.
Following the recent launches in the U K, Switzerland, Spain, Finland, and the Netherlands, We launched in Belgium in June and we are completing the launch in Italy.
So in summary revenue momentum is clearly building across our business as the recovery gains steam and our market you need to open up.
Advertisers of gaining confidence of vaccination rates increase remaining restrictions are eased and mobility build.
We're now seeing previously hard hit categories begin to.
The light up again, which is broadening the revenue base and strengthening our outlook.
We are well positioned to maximize the performance of our portfolio given the investments we've made in our digital data analytics and programmatic resources as well as our efforts with the in front of advertisers throughout the pandemic.
And I would.
At very healthy rebound in our business.
And with that let me turn it over to Brian to discuss our second quarter of 2021 financial results.
Thank you William Good morning, everyone. Thank you for joining our call as.
As William mentioned, we saw a substantial rebound in our business from.
In the second quarter with June revenues for Americas, and Europe, combined about 90% of 2019 revenue, excluding FX from China, and we are optimistic about our growth through the balance of the year.
However, we continue to manage our cost base, including negotiating rent abatements and some of the markets most affected by COVID-19 as well as.
Strengthening our capital structure.
Moving on to the results on slide 4.
In the second quarter consolidated revenue increased 68, 6% the $531 million adjusted for FX in China revenue was up 63, 4%.
Consolidated net loss in the second quarter was 100.
And the $4 million compared to a consolidated net loss of $143 million in Q2 of 2020.
Consolidated adjusted EBITDA was $97 million in Q2 of 2021, a substantial improvement over Q2, 2020, which was negative $63 million.
Adjusting for <unk>.
FX consolidated adjusted EBITDA was $99 million in Q2 of 2021.
Please turn to slide 5 for a review of Americas second quarter results.
The Americas segment revenue was $272 million in the second quarter of 2021.
Up 36% compared to the prior.
Third tier and at the high end of the guidance we provided in May.
Digital revenue rebounded strongly and was up 73, 8% for $85 million.
Local continues to rebound faster the national and was up 39, 7% with national up 32%.
Direct.
Higher yielding and SG&A expenses were down 5.7%. The decline is due in part to a 14, 2% decline in fight lease expense as the result of negotiated rent abatements. Additionally, credit loss expense was reduced due to improved collections and outlook.
Were partially offset by higher compensation.
The operating costs driven by improvements in operating performance.
Segment, adjusted EBITDA was $127 million up 176% compared to the second quarter of last year with segment adjusted EBITDA margin well above average due in large part the nonrecurring items.
Including the negotiated rent abatements.
Please turn to slide 6.
This slide breaks out our Billboard and transit revenue the Billboard and other was up 42, 6%, while transit was down for 2%, but the airport display revenue down 4.7% for $25 million.
Turning to slide 7 for a bit more detail on Billboard and others Q2 revenue performance.
Digital revenue from Billboard Street furniture, and spectacular rebounded strongly in Q2 and was up 97, 6% to 75 million with non digital up 27, 1%.
Next please turn to slide 8.
8 and a review of our performance in Europe.
Please note that as I comment on the percentage change from the prior year all percentages are adjusted for foreign exchange.
Europe revenue was $247 million adjusting for foreign exchange revenue was $224 million up 108.
8% compared to the second quarter of the prior year.
Ahead of the guidance, we provided in our Q1 earnings call.
Revenue was up across all countries, most notably in France, and the UK.
And digital revenue was up 159, 6% a strong performance driven in large part by the rebound in the U.
Yeah.
Direct operating and SG&A expenses were up 33, 2% compared to the second quarter of last year.
The largest driver of the increase in direct operating expense was higher site lease expense, which increased 28, 9% to $100 million.
After adjusting for FX due to.
The lower negotiated rent abatements higher revenue and new contracts.
SG&A expenses increased due to higher compensation expense as we cease of the temporary operating cost savings initiatives implemented in the prior year combined with lower government support and wage subsidies and higher commissions in the current year.
Additionally.
Direct operating expense and SG&A expense increased due to $16 million of severance and related costs for the restructuring plan. These expenses are not included in segment adjusted EBITDA.
Segment, adjusted EBITDA was $2 million after adjusting for foreign exchange this is compared to.
$69 million in Q2 of 2020.
Moving on to <unk>.
Our Europe segment consists of the businesses operated by CIBC and its consolidated subsidiary Accordingly, the revenue for our Europe segment is the same as the revenue for <unk>.
Europe segment.
To negative EBITDA of <unk>.
<unk> profitability metric reported in our financial statements. It does not include an allocation of <unk> corporate expenses that are deducted from the <unk> operating income and adjusted EBITDA.
<unk> revenue increased $140 million during the second quarter of 2021.
And compared to the same period of $2000.20 million to $247 million.
After adjusting for a $23 million impact from movements in foreign exchange rates <unk> revenue increased $117 million.
The <unk> operating loss was $40 million in the second quarter of 2021.
Compared to $99 million in the same period of 2020.
Let's move to slide 9 and a quick review of other.
Which includes Latin America.
As a reminder.
The prior year results include clear media, which was divested on April 28 of 2020.
Latin America revenue was $12 million from the.
The second quarter up $9 million compared to the same period last year.
Direct operating expense and SG&A from our Latin American business for $13 million of 4 million compared to the second quarter and the prior year.
Latin America, EBITDA was a negative $1 million.
Now moving to slide 10 in.
Capital expenditures.
Capex totaled $32 million in the second quarter, an increase of approximately $8 million compared to the prior year as we ramped up our investment in our Americas business.
On the slide 11 clear channel outdoor is consolidated cash and cash equivalents totaled 564 million.
As of June 30 of 2021.
Our debt was $5.7 billion up $169 million due in large part to the refinancing of the CCW H senior notes in February and June.
Cash paid for interest on the debt was $67 million during the second quarter and 212.
Millions of year to date are.
Our weighted average cost of debt was 5.6% as of June 32021.
Moving on to slide 12.
As mentioned, we continue to focus on managing our cost base and strengthening our cash share. This.
This includes achieving a $35 million and rent abatements.
Thats from the second quarter on a consolidated basis as a result of successful fixed site lease negotiations.
The majority of the rent abatements in the quarter when our Americas segment.
Also we received European governmental support and wage subsidies in the spot.
<unk> of $2 million in the second quarter.
We successfully completed an offering of $1.5 billion of 7.5 cc of 8 senior notes due 2029, we.
We used the net proceeds from the offering to redeem the remaining outstanding 9 in the quarter percent CCW 8 senior notes due 2024.
Additionally.
And as we previously announced in May.
We entered into a second amendment to 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.
Lastly in June 1 of our non guarantor.
Okay and subsidiaries entered into a state guaranteed loans.
For approximately $36 million the current exchange rates.
Which is guaranteed by the government of that country in response to COVID-19.
And finishing with our guidance.
As William mentioned for the third quarter of 2021 of Americas segment revenue is expected to.
For Europe in the range of between $315.325 million.
The adjusted EBITDA margin expected to return to close to Q3.2019 levels.
Our Europe segment revenue is expected to be in the range of between 245 and $255 million adjusting for FX.
Given our improved outlook, we are revising our second half revenue guidance from nearly 90% of 2019 levels to about 95% excluding FX in China the recoveries across the board led primarily by our digital roadside businesses.
Additionally, we expect cash interest payments.
For the $175 million in the last 6 months of 2021 and $324 million in 2022.
We expect consolidated capital expenditures to be in the $165 million to $175 million range in 2021.
This increase reflects our optimism regarding our prospects and our ability to.
The capture new prospects to drive growth.
Lastly, we are increasing our guidance for our liquidity balance as of December 31, 2021, including unrestricted cash and availability under the company's revolving credit facilities.
We expect from the bank, we expect the balance to be approximately 4.
<unk> hundred $75 million to $525 million, a $50 million increase from the guidance provided in may.
Please keep in mind that liquidity could vary based on timing of cash receipts and payments at year end.
That concludes my remarks, and now let me turn the call back over to Roy.
Thanks, Brian.
The recovery is now well underway across our markets and we are continuing to see solid revenue momentum in the second half of the year with several of our market ahead of 2019.
We remain focused on strategically investing our technology, including expanding our digital platform further strengthening.
And then of our pay for analytic capabilities and building out programmatic resources with the aim of broadening our presence among a greater number of advertisers and the increasing our market share.
Our business the soundly rebounding our organization is energized and we are very excited about the growth trends that are building across our market.
As we invest in our platform. We will also continue to carefully manage our costs supporting our efforts to drive profitable growth over the long term as well as maintaining our financial flexibility and objected to delever the balance sheet.
As I mentioned earlier I'm very excited about the future of the company and look forward to speaking.
With many of you over the next few months as we prepare for the leadership transition with Scott taking over as CEO at the end of the year.
And now let me turn over the call to the operator for the Q&A session.
At this time, if you would like to ask a question. Please press Star then the number 1 on your telephone keypad again.
Speaking of Star then the number 1 to ask a question for your first question comes from the line of Steven Kay Hall with Wells Fargo.
Yeah. Thanks.
Maybe first for Scott It looks like the Americas Q3 guide is pretty close to 2019 as you mentioned.
That is sounds like airport is better, but probably still down and I'm wondering of street furniture, probably is 2 in places like right. So just wondering how you think about the recovery in sort of the.
Bits of weakness and if we do see those get back to prior levels. How do you think about the EBITDA power in the Americas.
The business as that's done.
And should we expect any lumpiness to expenses due to sort of rent abatements and the back half of the year and then William in Europe, maybe you could discuss a little bit of what sort of margin do you start to expect as you get to full run rate revenues I think of that as sort of of mid teens margin business. So just wondering given all.
All of the cost of work that you've done how you think about it and then lastly, Scott just maybe what's next in terms of financial management, maybe you could discuss a little bit the covenant springing suspension and what you expect for free cash flow in the back half of the year end liquidity. Thank you.
Hey, Steve.
Thanks.
Brian I'll take that debt the covenant of 1 though so we'll.
We'll let him get to that 1.
On your question I do think.
Q3 is looking like it's going to be pretty close to its counterpart in 2019.
The things you named Eric.
6 of the street furniture or the things that'll.
That'll that'll probably lag we still do have the dynamic that some cities are recovering slower.
And then other cities are in the mix New York is actually recovering quite nicely. We don't we don't have much of the way of street furniture, there, but the the.
Part.
Square area is recovering nicely in the airports of recovering nicely along with the the roadside the that's done well.
In terms of the the margins I think there's going to be some lumpiness in our margins.
For a bit and maybe you witnessed it to the positive this quarter, yeah, we've kind of been.
<unk> assistant and talking about these negotiations are often for relatively big chunks of money and they you know.
On the hard to predict.
We're never 100 per cent sure how they're going to come in.
You know a couple of things will happen over the next 3 or 4 quarters..1 is we are still working on.
The some some relief.
On the on contracts that.
Looking back even over last year.
I think the other sort of happened to us.
You'll see some of the relief that we've gotten come out and so the the margins will be.
It will.
It'll take a bit of time for us to get to what we'd call steady state margins.
But I don't think it's going to be wildly dramatic either hopefully that answers. Your question on the the U S margin recovery.
Yeah.
William.
Yeah, I'll take the I'll.
I'll take the European question I'm not.
I'm going to give you any kind of guidance on what may or may not happen to margin over the.
Coming months and he is the speed and density you'd expect me to we will continue to be.
Very vigilant on costs across the European business I think we've done some excellent work and we've talked about on previous calls.
In terms of the the cost reduction program and the restructuring and that will continue to have impact.
In the coming years they'd obviously, what we can't.
We can't predict for the impact of.
Some of the the changes in inventory that we may see in the in the months and years of head. So I think I'll just leave it with other <unk>.
It's Brian wants to add anything before he takes on the the company in question as well.
Yeah, you know the the only thing I would add is you know.
As the recovery continues and incremental revenue is added that's obviously going to be beneficial and I think we're seeing that.
In Europe. So hopefully that's the that's helpful. Steve I think we feel.
And what about the direction we're headed.
On the Covenant question.
I think the 2 key things to think about are 1.
The relief that we got for with respect to the springing covenant itself.
Through the end of the year.
And so we will report our first.
Pretty covenant calculation.
At March 31st kind of compliance date.
And.
The second piece of the.
Obtained was a pushback of the step down.
And the <unk>.
The measurement and.
And that net debt.
Pushed down was of course.
Out of September.
The 2022.
Those are the the 2 things to think about in exchange for that we do have to maintain a $150 million minimum liquidity, but I think I think you can see from our liquidity guidance we feel.
Very comfortable about that the trajectory of the business we've actually.
Our liquidity guidance to $475 million to $525 million by the end of the year. So I think we feel pretty good with where we are with respect to the you know the.
The the Covenant relief and you know I would add it's the springing.
We can always pay off the the drawn amounts under the facility and we are looking like we have the liquidity to do that should we should we choose that path as well.
Thanks, and congrats Scott and William.
Yeah.
Your next question comes from the line of.
Covenant of the concept with Cowen.
Hi, Thanks, guys for taking the questions and great job on the quarter William Thanks for your leadership, obviously been a difficult time. My question for you is it sounded like your new role. If you mentioned it would include the evaluation of strategic considerations I E M&A.
So I'm wondering can you give us an update on what the M&A environment looks like today with the Covid recovery, so well develop that imagine it's possible and sell assets again am I right about that and get away from clear channel are you seeing deals get done and then if you could comment perhaps on what.
Whether you've ruled out any types of trans.
The actions or perhaps you could help us focus on what types of transactions, we would be most likely to see fiber cell of origin versus region size core versus noncore that kind of thing.
Right.
How much detail do you really want me to give you.
Let me, let me say for.
Wait.
From away from clear channel as you say I think the M&A environment is certainly getting more active.
People are.
On the I shouldn't say markets with the valuation gaps of narrowing and.
There's a lot more going on right now is in the world. This time last year for Covid.
The very obvious reason so so.
So yes, it's more active and yes, my new role certainly will involve me in.
Looking at strategic opportunities for for the business across all across our footprint.
I don't really think you would expect me to give any kind of.
A wave of of where we might be looking to transact or what kinds of transactions. We might look at we're very conscious that in February of last year. We said on our earnings call. Then that we would look to focus the business more on the higher margin asset.
Patients and that remains our strategy.
So that he can lead you to some 30, some fairly obvious conclusions I would think about the the geographies that we would we would be looking at.
But as to timing I don't think we would want to say anything more at the moment all of them but.
Things are.
And not only getting more active and we will continue to evaluate all opportunities as they appear.
And as we would consider that they would be.
Deliver shareholder value I think I should just leave it of that but thanks for the US great that's great.
The other question is just and not to be the pepper in.
The punch Bowl here, but what about the Delta variant from it it doesn't sound like you're worried about it but why doesn't that risk derailing the recovery in your view.
Yeah, I mean, I think on what I would say appropriately worried about it.
Any any variant of of this.
Of this virus is concerning to us and we've all seen too much out of the lost.
15, 16 months to be in any way complacent, what I would say is what I've observed.
And we've had more experience of it.
In Europe than in the U S. So far.
What I've observed and what I think is confirmed by.
All of the analysis of all of them.
So the Delta variant is highly infectious it does appear that the vaccine do offer from significant resistance and all of.
Our resulting in significantly lower.
Realizations are.
As a result of Inc.
As a result of that I think it is highly probable the government will continue to resist imposing any further restriction.
And as you'll know.
In the U K, which has been the most affected by.
The hospitality the delta of variance they fall in the U K, our government has taken a very conscious decision to the unlock the economy and remove restrictions.
The very time that infections from the Delta variant, we're increasing and they've done that because they feel confident around the the hospitalization.
Asian rights.
So look you know I'm not an epidemiologist I'm not an expert on the topic.
What I would say based on what we know today.
Our views about the second half of the year standard stated and.
It reflects the confidence in the recovery.
If something changes in the way in which.
The the vaccines protect against the Delta there and then all bets are off but that's how I see it at the moment.
Thanks, so much guys.
Again, if you would like to ask of.
The question. Please press Star then the number 1 on your telephone keypad that star 1.
Your next question comes from the line of Jim Goss with Barrington Research.
Hi, Thank you I've got a couple of also burst of going back for the emerging the question rich.
Would you say the.
Electric margins should have a sustainable.
Target level north of 40%.
As is the.
Recovery in all areas.
And you've got the benefit of the digital and you also have some for potentially some cost and expenses.
The day minute may have been cut during the pandemic that you might be able to keep under control in the future.
And that would be first question.
Brian do you want me to speak to that or do you want to take that 1.
The problem is going to take it but yeah, I mean, yeah, yeah, sorry, Scott I'll.
And then obviously you you probably you can add some color and add in if he'd like.
Like 40% sounds like you know pre COVID-19 level margins in the U S and I think that.
That's certainly something we'll strive for we do have some tailwind from cost saving initiatives that we've put in place.
And the other thing.
I'll take some but we also of headwinds from the such things as portfolio mix. So I think the first thing that has to happen is we have to get back to the revenue level, but even once we get back to the revenue level, we will really need to.
Our work on keeping the cost savings in place to get back of that 40 per.
The whole because we do have to make up for some portfolio mix changes and that's just the nature of the business.
And that even if revenues go back to 2019 doesn't mean your business makeup is the same.
And so those are kind of the pushes and pulls.
We likely will need to continue to work at it to get back from the 40%.
Sent level, but we you know we won't be far off as we continue to recover from from Covid. Scott do you have any additional color you'd like to add.
I mean, I think the only thing the other thing I'd call out of the seasonality does matter in this business and so it may not be 40% of every quarter.
Well, we think about that.
The things play out, but I think your answers right on.
Okay. Thanks, and 1 other thing maybe I'll touch on.
The increase for digital was significantly greater than the increase for Billboard and more than that accounts and be accounted for by platform changes.
I'm wondering if there are certain carrier advertisers for.
We're considering both formats in various areas.
What are the factors behind their decision making.
And the.
You know his 2 of which are which of course.
Credit for them and is this a.
The starting to create a little bit better pricing power.
On the digital side as you've seen it seem that the utilization of group.
So I'll take a run at this from the U S. And then Williams do you want to add anything.
Internationally, we can we can touch on that as well.
So I guess I guess first and foremost as you look at the recovery you got to remember how things fell to cause our Princeton.
Prince of assets did not fall nearly as far.
As the digital did and so part of why you're seeing the big growth in digital now is because it's it's comping against.
So significantly worse numbers, if you go back and look at our Q2 of last year.
The digital was.
Hit much harder than the printed.
In terms of your question about advertisers, making decisions I think theres, a theres a variety of things going on.
Foremost digital has the immediacy.
To it and so.
With advertisers reacting to.
The things rolling out across the country digital has given them a very convenient way.
To activate in markets as markets get.
For secure more stable and.
People get out of the streets more and things like that I think we are developing different use cases for digital whether it's in the in the programmatic use case or.
Roadblocks or something that we're doing more and more of.
They're just different use cases for it that advertisers use.
Whether it's for a film release for new product launch or trying to sustained momentum.
The place with.
Like of CPG type product, where where theyre looking to heavy up.
Digital gives them the ability to do it so.
I do think digital.
It has been a premium product since we developed it.
It remains of premium product.
It's on some of our best locations that we've converted the digital and so.
I do think it's something that we received very attractive economics for them.
In this business.
Whenever you have demand strong you you see that that dynamic volume I don't know if you'd add anything.
Incrementals of that as well.
No I think you'd know that Scott. Thank you.
Okay, and lastly are there any broad category of showing greater resilience you've mentioned a couple of the day.
For technology media for.
Are there some of it are really driving the recovery right now for you.
Again, the sort of from a from a U S perspective.
We went out and got a number of new category.
The active during COVID-19.
And what we're seeing now as as things go back as some of the.
Industries that were hit really hard during the COVID-19 or are coming back. So you know theatrical is probably the most obvious.
<unk> of film releases, we've had.
[noise] of good strong film releases this year and a really good pipeline.
The film releases coming so they they've come back amusements of come back.
You know you've seen a travel and leisure come back. The those are all categories that were hit really hard and that's building on top of.
Of some things like in home improvement in real estate.
The categories that we actually were able to develop pretty successfully during the COVID-19. So.
It's a it's a good time in the.
Of the business right now out of traditional advertisers coming back.
Building on top of some categories that we've done lots.
Of during during the Covid.
Okay, Thanks, and congratulations Scott.
Thanks, Jeff that's it thanks.
Thank you there are no additional questions at this time I would like to turn it back over to Mr. Appleshare for closing remarks.
Thank you and thank you everyone for joining our call today.
I just wanted to end by just making a few comments as we announce the the CEO transition today.
<unk> stepped down until till the end of the year and I will continue to kind of the company as you know.
The Vice chairman.
For 2000.
But I would just like to say it has truly been a great honor for me to lead this business over the last for years.
To lead the digital transformation of the the greatest the greatest.
Mass reach medium of the mall.
To take this company into for public.
Ownership with the full NYSE listing is a it was a fantastic step for this business.
To lead this business through the pandemic and see the resilience of our people.
And I have enormous pride in the way that our people stepped up and continue to to drive and develop the business.
'twenty in really tough circumstances.
And finally to say that.
The the <unk>.
Friday of having in handing over to Scott as my successor, who I know will continue to.
Build the business to grow the business and to develop it and build on all.
And what we've done over the last years.
So I was just thank you to everybody you'll continue to hear my voice I'm on this call for certainly for the next earnings call and thanks, everybody for joining us.
Thank you. This concludes today's conference call you may now disconnect.