Q1 2022 Clear Channel Outdoor Holdings Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by welcome to clear Channel Outdoor Holdings, Inc. 'twenty to 'twenty two first quarter earnings Conference call. My name is Alex they'll be coordinating the call today, if you'd like to ask a question at the end of the presentation, you're compressing star one on your telephone keypad, if you'd like to withdraw. Your question you May press Star two.
I'll now turn the conference to your host Eileen Mclaughlin Vice President of Investor Relations. Please go ahead, good morning, and thank you for joining our call.
On the call today are Scott, well, our CEO and Brian <unk>, our CFO , Scott and Brian will provide an overview of the 2022 first quarter operating performance.
Yeah Outdoor Holdings, Inc, and clear channel International D. We recommend downloading the presentation location.
The site and review the presentation during this call.
The introduction and review our results well open the lines for question and Jeff can conference CEO of clear channel you will participate in the Q&A portion of the call before we begin I'd like to remind everyone that during this call. We may make forward looking statements regarding the company, including statements about future.
Your financial performance.
All forward looking statements involve risks and uncertainties and there can be no assurance that management's expectations beliefs or projections will be achieved or that actual results will not differ from expectation.
Please review the statements of risks contained in our earnings press release, and our filings with the SEC. During today's call. We will also refer to certain performance measures that you're in.
Not conform to generally accepted accounting principles, we provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings release and the earnings Conference call presentation. Also please note that the information provided on this call speaks only to management's views as of today may.
2022, and may no longer be accurate at the time of a replay.
Please turn to page four in the Investor presentation, and I will now turn the call over to Scott well good morning, everyone and thank you for taking the time to join today's call.
Celebration and the recovery of our business that we saw during the fourth quarter of last year continued into the first quarter.
We delivered consolidated first quarter revenue of $526 million, a 42% increase over last year's first quarter.
Excluding movements and foreign exchange first quarter revenue was up 45%.
Solid performance despite the omicron challenges we saw in January .
We also delivered a substantial improvement.
Adjusted EBITDA that Brian will discuss later in the presentation.
Our strong top line performance reflects continued broad based demand for advertisers with particular strength across our digital footprint.
Americas and Europe I'd like to thank our team members around the world for their commitment to building our business and we appreciate their great work.
Underlying recovery in our business coming out of the pandemic, we're continuing to make progress in leveraging our technology investments to innovate and modernize the solutions, we offer an expanded pool of advertisers we can pursue.
We believe that through the timing of data driven visual media powerhouse, we can strengthen our financial position as well.
During the first quarter digital revenue Rose 70.
In the Americas, and was up 99% and Europe , excluding movements in foreign exchange rates compared to the first quarter of last year, our digital footprint and it's particularly valuable during recent periods, where uncertainty has been elevated among advertisers are digital board to provide them with the flexibility to book later in the cycle.
While we have benefited from our ability to move quickly to launch campaigns and Lockheed business with shorter lead times.
Looking at our digital footprint in the U S. We deployed 13 large format digital billboards during the quarter.
So our total more than 1500 digital billboards combined with our smaller format digital displays it's reported on shelters, we had a total of more than 3900 digital displays domestically and in Europe . We added 979 digital display it in the first quarter for a total of over 18500 display is now live.
As I mentioned on our last call I want to share some color on the two pillars of our strategy centered on improving customer centricity and driving execution excellence. Our customers are focused on faster easier and data driven campaigns, we developed radar, which we've highlighted in the past the deliberate suite of data driven solutions our customers too.
We've made our business easier to buy through our investments in programmatic solutions opening up our platform to a broader base of digital media buyers and throughout the pandemic, we focused on utilizing technology to make the processes involved in winning and watching campaigns faster.
On that point, we're automating the processes involved across the campaign cycle from identifying opportunities all the way through installation or activation of creators, which are significantly reducing the time involved in pursuing winning and executing on contracts.
For example, we continue to improve and modernize the systems software and process infrastructure supporting the installation of campaigns for optimizing installation routes to updating the proof of performance tools that provide our customers with the ability to verify in real time that their print and digital campaigns have been executed this now.
Not only creates efficiencies in our organization, but it also allows us to deliver value faster to our customers.
Looking ahead in the current quarter, we're seeing healthy demand across our business in the U S. Our bookings are strong and we are seeing growth in all regions as well as in our airports business, both national and local are pacing up double digits and we are well ahead of 2019 performance in Europe since January the revenue of each.
Each month has improved when compared to 2019, and we expect that to continue into Q2 with revenue approaching pre COVID-19 levels, Brian will provide an overview of our second quarter guidance in his prepared remarks.
Finally, as we execute on our core operating strategy.
We're also evaluating accretive tuck in acquisition opportunities that will further strengthen our presence in the U S. While moving forward and evaluating strategic alternatives for our European business as part of our focus on optimizing our portfolio.
And with that let me now turn it over to Brian to discuss our financial results as well as our guidance.
Thank you Scott good morning, everyone and thank you for joining our call.
As Scott mentioned, we had a good first quarter, even with a slow start in early January .
Looking forward were optimistic our business will continue to strengthen throughout the year.
Moving on to the results on slide five.
Before discussing our results I want to remind everyone that during our GAAP results discussion I'll also talk about our results excluding movements in foreign exchange a non-GAAP measure we believe it just provides greater comparability when evaluating our performance.
To avoid repetition the amounts I referred to are for the first quarter of 2022 and the percent changes our first quarter 2022 compared to the first quarter of 2021, unless otherwise noted.
Consolidated revenue was $526 million, a 41, 7% increase adjusting for movements in foreign exchange consolidated revenue was up 45, 3% to $539 million in line with our guidance consolidated net loss was $90 million compared to a net loss of 333 million.
And in the prior year.
Adjusted EBITDA was $66 million up substantially compared to negative $33 million in the first quarter of 2021 excluding.
Excluding movements and foreign exchange adjusted EBITDA was slightly lower at $65 million. Please turn to slide six for a review of the Americas first quarter results America's revenue was $295 million up 39, 3% and even more significant we returned to pre COVID-19 revenue levels.
With revenue up 8% compared to Q1 of 2019.
Revenue was up across all products, most notably airport displays and Billboards digital revenue, which accounted for 36% of Americas revenue was up 68, 3% to $106 million driven by both airports and billboards.
The rebound in digital is in large part due to the flexibility ease of buying digital as well as the rebound in airline traffic.
National sales were up 46, 9% accounting for 38, 9% of revenue with local sales up 34, 8% and accounting for 61, 1% of revenue.
Direct operating and SG&A expenses were up 24, 5%.
The increase is due in part to a 29, 4% increase in site lease expense to $108 million.
Driven by higher revenue and lower rent Abatements. In addition compensation costs were higher due to improved operating performance segment. Adjusted EBITDA was $110 million up 71, 8% with segment adjusted EBITDA margin of 37, 4%.
Excluding one time items in the quarter related to Covid margins would've been closer to the segment adjusted EBITA margins, we reported in the first quarter of 2020.
Turning to slide seven.
This slide breaks out our Americas revenue into Billboard and other and transit.
Billboard in other which primarily includes revenue from bulletins posters Street furniture displays spectacular and wall Scapes was up 23, 9% to $236 million.
This performance was driven by improvements across all our regions with particular strength in the northeast and California.
Transit was up 176, 2%, but the airport display revenue up 186, 6% to 56 million <unk>.
Airport revenue was helped by the rebound in airline passenger traffic.
Now on to slide eight for a bit more detail on Billboard and other.
Billboard and other digital revenue continued to rebound strongly in the first quarter and was up 33, 7% to $75 million and now accounts for 31, 9% of total Billboard in other revenue.
Non digital revenue was up 19, 8%.
Next please turn to slide nine for a review of our performance in Europe in the first quarter.
My commentary is on results that have been adjusted to exclude movements in foreign exchange.
Europe revenue increased 53, 9% driven by improvements across all products, most notably street furniture and in all countries led by the U K and France.
Digital accounted for 37% of total revenue and was up 98, 9% driven by an increase in digital revenue across almost all markets, including our largest markets in the UK and France.
Direct operating and SG&A expenses were up 12, 1%. The increase was driven in part by increased site lease expense, which was up 13, 3%, resulting from higher revenue lower negotiated rent abatements and lower government subsidies.
Production maintenance and installation expenses were also higher.
Additionally, compensation was higher due to the improved operating performance and lower government support and wage subsidies segment. Adjusted EBITDA was negative $15 million after adjusting for FX and improvement over the negative $68 million in Q1 of 2021.
Moving onto CCI BV.
Our Europe segment consists of the businesses operated by CCI BV and its consolidated subsidiaries Accordingly, the revenue for our Europe segment is the same as the revenue for CCI BV.
Europe segment adjusted EBITDA the segment profitability metric reported in our financial statements. It does not include an allocation of CCI bvs corporate expenses that are deducted from CCI Bvd's operating income and adjusted EBITDA.
Europe in CCI BD revenue increased $68 million during the first quarter of 2022 compared to the same period of 2000 $21 million to $217 million.
After adjusting for a 13 million dollar impact from movements in foreign exchange rates, Europe , and CCI BV revenue increased $81 million during the first quarter of 2022 compared to the same period of 2021.
<unk> operating loss was $48 million in the first quarter of 2022 compared to an operating loss of $100 million in the same period of 2021.
Let's move to slide 10, and a quick review of other which consists of our Latin American operations semi.
Similar to Europe My commentary on the results that have been adjusted to exclude movements in foreign exchange and other revenue was up 43, 3% driven by improvements in all countries direct operating expense and SG&A was up seven 4% driven by higher site lease expense related to higher revenue.
And segment adjusted EBITDA was negative $1 million, a $3 million improvement over the prior year.
Now moving to slide 11, and a review of capital expenditures.
Capex totaled $36 million, an increase of $18 million compared to the first quarter of the prior year as we ramped up our spending particularly on digital in the Americas.
Now onto slide 12.
During the first quarter cash and cash equivalents increased 21 million to $432 million as of March 31 2022.
The increase in cash during the quarter when compared to the same period in the prior year was driven by improved operating performance and reduced cash interest paid during the quarter.
Our debt was $5 6 billion.
<unk> declined from year end due to the scheduled quarterly term loan amortization payment of $5 million.
Cash paid for interest on debt at March 31, 2022 was $52 million during the first quarter. The cash paid for interest was down $94 million compared to the same period in the prior year due primarily to the timing of interest payments related to the refinancings, we completed in 2021.
Our weighted average cost of debt was five 6% in line with December 31 2021.
Our current liquidity is 648 million, a slight increase compared to liquidity as of year end due to the improved cash position and marginal increase in availability under our receivables based credit facility.
In June of 2020, and again in May of 2021, we entered into amendments to our senior secured credit agreement, providing for a waiver of the springing financial covenant.
With the exploration of the waiver. After December 2021, we are again required to comply with the springing financial Covenant.
As of March 31, 2022 are first lien leverage ratio was five four times well below the covenant threshold of seven six times.
Moving on to slide 13, and our outlook for the business.
At this point in time, we believe our consolidated revenue will be between $655 million and $675 million in Q2 of 2022, excluding movements in foreign exchange rates.
Americas revenue is expected to be between $340 million and $350 million.
And Europe's revenue is expected to be between $300 million and $310 million excluding.
Excluding movements and foreign exchange rates.
We are increasing slightly our expectations for consolidated capital expenditures to be in the $195 million to $215 million range in 2022.
Consistent with our plans to accelerate our digital transformation, we expect around 60% of this amount will be spent on digital assets across our portfolio.
Additionally, we anticipate having approximately $333 million of cash interest payment obligations in 2022, including $282 million in the last nine months of this year, assuming current debt levels and interest rates.
And now let me turn the call back to Scott for his closing remarks, thanks, Brian .
Our business momentum has continued into the second quarter and we're pleased with the breadth of demand, we're seeing across categories and markets, particularly with regard to our digital assets. The visibility we have with advertisers remains robust. Despite various macro challenges. We believe this continues to demonstrate the resiliency of our business.
We're focused on utilizing the right technology to elevate our digital and print assets expanded deepen our client relationships and operate efficiently I would like to thank our team for their dedication and focus as we seek to strengthen our business in the year ahead and.
And now let me turn over the call to the operator for the Q&A session and Justin Conference, our CEO of Europe will join us on the call.
Thank you as a reminder, if you'd like to ask a question star one on your telephone keypad. If you would like to withdraw. Your question you May Press Star two please ensure your unmetered lately when asking your question.
First question for today comes from Steven Cahall from Wells Fargo. Stephen Your line is now open.
Thanks, Good morning, Scott within the guidance, you said youre seeing healthy demand. It sounds like bookings are very strong with the double digit pacings across the board.
Still I think of course, the question is whether you've seen any change in behavior and the way advertisers are acting in light of this macro backdrop. So would just love some additional color. There. It seems like transport is recovering really strongly digital is very strong, but maybe you could go a few layers down and just talk about any additional non transport trends that youre seeing.
And just anything else, we should we should be aware of as we think about the year and then on the European Strategic review I think your assets. There are a lot more western and eastern just curious if there is any kind of spillover effect from what's happening in Ukraine is there any delay to that process or is it proceeding along as far as you can say.
And on the M&A front, you mentioned some U S tuck ins, what kind of things really fit well into your portfolio on the U S second side. Thanks.
Okay.
Thanks, Steve <unk>.
Appreciate the questions.
In terms of the change in behavior, we're really not seeing a change in advertiser behavior right now.
Dialogues that we're having both of the national and local level are strong people are looking to invest in the business and their businesses, they're looking to drive demand and I believe that the U S. Consumer remains in a pretty decent place. Despite all of the inflation now we can talk about how does that.
Change or how does that shift, but I can't tell you that there's anything we're seeing right now in what our advertising partners are saying to us and I think we've actually made real progress as a medium in terms of demonstrating how we amplify other media and as you know everyone advertisers all.
Got quite overexposed to digital during Covid I think part of what Youre seeing right now is a little bit of a rotation.
Have some of the things that have that nice amplification effect and that's part of what's behind it I'm going to hand, it to Brian to talk about the Europe .
The European strategic process.
Hey, Steve on the process, we really aren't making any comments unless and until the board approves a course of action, but the comment you made about our presence is accurate we are largely in western Europe , our largest markets of France, and the U K, we have no presence in Russia, we have no presence in the Ukraine very.
Very small presence in the baltics, and some in Poland, and Finland, but but really not.
Not much of a.
The majority of our presence in Western Europe .
Yeah, and then on your final part of the question about M&A tuck in.
For us the thing that we're really looking for our assets that complement our base.
We are realistic about our balance sheet. So our ability to go after really big targets is probably not.
What it might ideally be.
So the thing that looks good to us is something that is adjacent to a place that we operate currently something that we think that we can bring revenue upside to something that maybe we can bring some operating efficiency too.
But we have a.
Good.
Working list of opportunities a good pipeline and feel like there is there is good prospects for us to continue on that path. So thanks for the questions.
Thank you all.
Thank you next question comes from Cameron Mcknight from Morgan Stanley .
Your line is now open.
Thanks, guys. So inflation has been top of mind I'd be curious about your ability to increase rates and if theres been any pushback from advertisers on that front.
Then secondly, if you could speak to the growth in programmatic any interest in that channel from advertisers. Thanks.
Sure so on inflation.
This has been a good rate environment.
For us.
We are seeing cost across their portfolio and when we talk about the need for us to increase our rates.
Something that is not out of alignment with what with what they're seeing in other areas and it's also coming out of a time when.
We had been depressed a bit during COVID-19 I mean, we are still it's going to take a few more quarters for us to get to where we have a quote unquote clean comp.
That that'll that'll give you a really really pure look on on how the pricing.
Power dynamic is playing out but I don't think that were seeing inordinate pushed back of course, there's always pushback whenever you want to have a conversation about raising prices, but in our case a big part of the dialogue is about the value that we bring and we actually are continuing to bring more value the things I talked about on the call.
In terms of our improved operations and transparency are just some of the things that we're able to talk about in terms of the improved value and also the inherent scarcity of a lot of our assets.
It makes that makes that a conversation we're able to have and when I look at our yields the thing Thats encouraging is I see upticks on both the occupancy aspect and the right aspects. So this is not just a pure.
Price play Thats going on right now it is a good pricing environment, but we are seeing occupancy come up as well, which.
It is encouraging.
As for programmatic.
That is a channel that is that is still emerging.
Channel that the standards are still evolving there is a lot of different players.
In terms of the supply side partners and the demand side partners and you are in that stage, where people are starting to differentiate themselves.
Some are getting traction some are having a harder time.
Getting a better feel for what works, but it's still definitely early innings of the development of it I do think that it's a it's a channel that a lot of advertisers prefer because they like to have the flexibility we saw.
In early January when Omicron was a big deal we saw programmatic slowdown that's not great for our business, but it's fantastic from the advertiser's perspective, because they are able to just come in and come out and so striking that balance between how much of our book is programmatic and how much of it is direct and how much of it is short term versus long term.
<unk> is something we're still working on exactly the optimization and how that works, but I think programmatic is going to be a long trend story in this in this industry I think it's something that creates another way to buy that that advertisers are interested in I don't think it becomes.
I mean, even in even in the digital media there is still a healthy direct business, where where things get locked in and and physicians get secured on on longer term contracts. So I would expect that.
It's a long time from where programmatic is the majority of the business, but I think that programmatic is going to be an important part of the business hopefully that answers your question.
Definitely thank you.
Thank you next.
Our next question comes from Avi Steiner of JP Morgan.
Your line is now open.
Thank you and good morning.
A couple here.
One on the earlier inflation question, if I can take it from the other side are there any site lease agreements.
Or if you could characterize it that are index to inflation here or potentially more likely in Europe , and then I've got a couple more thank you.
Sure so on the on site lease.
<unk>.
It is it is not the case that many are indexed to inflation I'm not even sure Brian I mean do you know are there is that something thats a thing.
It is I think in Europe , and maybe we'd let Justin respond I think in the U S. We don't have a lot of it in our portfolio adjusted and your thoughts on Europe and is there a material amount of contracts and we are a portfolio with lots of contracts I'm sure. There are some well I'll turn it over to you for the European deal.
Yes, thanks, good morning, everyone.
So we've got to obviously.
A big range of contracts in Europe .
There's a lot of fixed rent.
And it does increase and some other contracts over time some of it is just a stipulated staple center some of it as it relates to inflation it tends to happen on the anniversary of a contract. So you don't just suddenly stage will come into that into the business in one go.
So you'll you won't see a sudden increase in rins expense because of inflation being high it will be in place.
The dates of the contracts anniversary and that's only for a limited number of contracts. So we don't believe it's a material number for the business.
Terrific. So I don't think Thats, a big concern overall across the whole portfolio Avi.
I appreciate that thank you and then Scott in your opening remarks, you talked about <unk>.
Automating all parts of the campaign cycle, and obviously that seems like a powerful tool when fully implemented but I'm wondering.
You mentioned efficiency and I'm curious.
Maybe this is not a today discussion.
Impact, but I'm curious if there is cost saving element as you move in that direction.
Sure. So when you when you think about the efficiency.
There's a lot of ways that we can drive efficiency through technology, we can drive it by having fewer.
Fewer visits to the location. So if at one point, we needed to have an install or go to a location to hang a sign and then a photographer go to take the picture.
By having the install or take the picture you get you get productivity that way.
You can get productivity by route optimizing I mean, some of our plants are very large and you might be 400 miles from the <unk>.
Centre to the periphery and so getting the scheduling of putting the installed in place.
Right and staging them in even frankly selling them.
In a way that you do that to optimize the windshield time is important and we're doing we're doing all of those things from a cost base perspective, you should think about that I think about good manufacturers that I worked at worked with in earlier stages of my career and generally what good manufacturer.
<unk> strive for is to have productivity cover their inflation and thats kind of how I would think about.
Productivity.
In our install process. It is not a huge driver in our overall P&L and so what we're looking for and frankly, what we generally have achieved over time is keeping that cost per install.
Cost per campaign in a in a tighter place and the other thing that comes into play that makes this something that I don't know how helpful. It is going to be for your models is that while we still have lots and lots of long term contracts. The general contract length has shortened and that's been a many many many year trend.
And so you end up with more installs.
In the mix and so that's also part of the inflation youre trying to keep down by by having better productivity. So I don't think you should think of it as being something that.
Dramatically lowers our cost over time, but you should think of it as the toolkit, we have to manage our cost per install and keep that in line and keep that from.
Eating into margins.
Thank you a couple more here.
Scott a couple of other mediums and this is just to maybe repeating a theme, but that we follow have talked about a bit of a slowdown and it sounds like youre not seeing any certainly in Americas.
And I'm curious why you think the outdoor medium is holding up so well on an absolute and a relative basis, just again, particularly given what some other other mediums are saying out there.
Yes, it's a great question I do think the amplification point I made before is important because I think we actually have seen.
Through case studies that we've done that our competitors have done and frankly, some other media have done there is a lot of evidence in the marketplace of how out of home makes other media more efficient.
And that that is something that we're certainly selling two it's something that seems to be very much resonating in the market I think thats a factor I think the fact that people are clearly out in about I mean, those of you that our airport travelers know that the airports now are dramatically different from what they were four months ago and that.
That aspect everybody sees that and they want to be getting their brands out and they want to be getting their opportunities out in front of those those folks as they go out in the world and so us being.
In real life medium is a is a big factor we were hit hard in Covid I think there is an effect here of <unk>.
Recovery.
I'd love to tell you that airports doubling and tripling elements of their inventory year on year is something that we can do forever, but I would never tell you that because.
That's not realistic it's not it's not going to happen, but it is happening right now because of that dynamic that I just described to people being out and about again, so I think theres a lot of things that are unique to us and I think this is this is one of those places that us being a small part of the media mix actually can be helpful to us because.
We're able to pitch, how we help the other media perform better but we're not super.
We don't have to land a huge portion of the budget to see incremental growth in our business. So all of those things I think are combining it's a it's a good environment and I think you've heard it in the other out of home.
<unk> reports that have come that this is not it's not a clear channel specific thing. It is out of home more broadly is is benefiting from these dynamics.
Absolutely and thank you and then last one because I don't want to ignore Brian .
And while I'd love to ask about Europe , I'll hold off but.
Brian how does the company think about its floating rate debt in the context of this kind of rising rate environment, we're in and maybe any potential ways to mitigate that and thank you all for the time appreciate it.
Yes, it would be a Iranian Saturday if you if you forgot about me. So I do appreciate the question I think I think the first thing I would want to do is put this in the right context. The company has about two thirds of its debt, 66% fixed rate and that was by design.
Since separation, we refinanced at lower rates over long term pushed out the maturity profile and locked in low rates.
And so we feel pretty good about our fixed floating mix I also go back to the history of the outdoor business and how.
It's done pretty well adjusting to.
A rising interest rate environment and growth environment. So.
I would say, we think about it we continue to monitor interest rate exposure and the operating environment, but we feel pretty good about where we are but that all being said should opportunities present itself too.
Lock in lower rates or be opportunistic in and reduced interest cost by repurchasing debt or whatever these are things, we'll continue to monitor and look at.
I'd remind everyone. We do have about $400 million of cash, which is a floating rate asset which is.
It can be thought of as an offset to some of the floating rate liability exposure, but I think overall, we feel pretty good and we'll continue to monitor the situation.
I appreciate the time everyone. Thank you.
Thanks Avi.
Thank you next question comes from.
Tom.
Your line is now open.
Thanks. Thanks, guys question on digital displays coming out of Covid, we saw digital campaigns come back Onstream very quickly. So youre strong exposure to digital in the UK For example was a real plus why doesn't that cut both ways in other words to the extent the economy does or the consumer does begin to deteriorate.
Why weren't those digital campaign, we shut down as quickly as they were started it couldnt that be at.
Headwind for you.
Hey, Lance it's Scott here.
<unk>.
On the digital I mean, I mentioned before that during the omicron fear programmatic, which is 100% digital.
Did did slowdown so youre right that that can cut both ways. What I'd. Just tell you is we are not seeing that right now.
Not to say that if we.
Won't happen at some point in the future and some environment in the future, but that is not the environment that we're seeing in front of US right now and I think the other the other part of it is that in digital.
It can cut both ways, but the other thing. It does is it gives you a ton of agility in terms of your ability to have layers of prospective backup contracts that you can work with and so there is.
There is almost always with the kind of inventory we have a market clearing price that we can that we can work out and that's the job that we've gotten increasingly sophisticated at.
As the years have gone by so while that dynamic is there I don't think we would trade that agility for four for anything.
So in a way the agility allows you to capture to better capture whatever demand it looks like at the moment as opposed to potentially being priced out of the market. So to speak with static displays is that fair.
Exactly exactly yes that makes sense, okay, and then so with respect to the Capex budget could you, perhaps break that out or even just in rough percentage terms. The amounts that you would think that that will be.
For digital displays versus let's call them the radar type initiatives, where you are kind of extending the.
The efficacy of the medium into other channels and then just the sort of the plain old static board maintenance type Capex.
Yes, we never we've never really well at least not in recent times broken out the capex into different buckets and I think traditionally people have asked about.
Maintenance versus growth. We also have what we kind of categorize a sustaining.
And so we haven't we haven't broken it down and we can think about how best to respond, but I don't know off the top of my head kind of what what portion of that is radar related or in the broader space. So.
A little bit of a non response, there lance, but let us think a little bit about it.
Part of the corporate expense growths in separation clearly has been.
Directed toward.
And so whether it's a function of capex or a function of Opex is something that we continue to invest in and build out.
And I also would say just on the Capex point wasn't part of your question, but I think it's important.
We are ramping up capex.
A majority of that new Capex is going to be directed to digital.
In the Americas as part of the digital transformation, but it is also something that has a large discretionary component and you saw that during COVID-19, we were able to to dial back I think our Q1 Capex is twice what it was.
In the quarter, a year ago, and so we do have flexibility and given what we're seeing today. We are opening up the spigot so to speak and we are reinvesting in the business given the trajectory of the business and what we see so I went a little broader than your question because I wasn't really able to answer the question, but hopefully I.
I gave you a little bit of data.
No you did and then just maybe to finish up for me you started to go there, Brian but I did want to ask it looks like corporate expense did tick up a fair bit and I'm wondering as we think about the balance of the year should we think about that as kind of a run rate or were there some sort of.
Factors that led that to be a little bit higher than typical.
In Q1 thanks.
Yeah look I think I think the growth in corporate expense.
In Q1, you can kind of divided into two buckets.
And one is.
The restructuring bucket, which I don't think repeats itself and that was largely related to general restructuring restructuring and other costs.
Including an increase to our legal liability legal liabilities.
And then I think the other half is something that Youll continue to see because it is largely related to compensation benefits due.
Due to the operating performance and we can continue the COVID-19 recovery and growth we're seeing in the business. That's a that's an expense we're likely to see in.
It's a high class problem to have.
Got it thank you.
Thank you.
Our next question comes from Richard Choe of J P. Morgan Richard Your line is now open.
I just wanted to follow up on I guess the margin side of the business. It seems like given the revenue guidance for the second quarter. The Europe should turn to positive in the Americas improved can you kind of give us a little bit color on where margins should go into two segments.
Through the year and maybe starting with the second quarter. It seems like low Forty's is a good range for the Americas and Europe should be flat to if not positive.
I have a few more.
Hi, Richard Thanks, I will I'll take the Americas, and then I'll flip it over to Justin for European commentary.
I think I think in the Americas, given given what we're seeing it is it is reasonable to assume.
Margins in the low forties area.
Particularly if the business continues to perform as it has.
I would remind.
Folks that we are still receiving some COVID-19 related rent abatements and release relief.
That will continue to unwind and so while I think I think we feel pretty good about.
That that margin forecast for the rest of the year as we start 2023 and lap some of these periods then.
That obviously needs to be considered.
And I do I do I do expect the business to continue on this trajectory based on what we've seen so we feel pretty good about that in the Americas adjusted and your thoughts on Europe .
Yes. So if you think about your we saw Scott and Brian Both mentioned a good pick up on revenue through Q1, we started low with only an impact then picked up and we're seeing that same pick up through the second quarter.
We do expect to deliver positive EBITDA in Q2, and I think if you think about margins for the business. So I think that there's a lot of things moving in the businesses. There's a lot of ups and downs, but I think for the rest of the year you can be thinking we expect margins similar to that for 2019 for the remainder of the year. So I think if you look at we've given the revenue guidance, but.
Q2, and I think you can expect to see positive margin improvement.
Great and then a clarification on the Capex, if you do have M&A opportunities in the Americas.
Should we expect.
That too.
Be on top of the Capex guidance or would that be just a different avenue of kind of call it growth capex.
I think our guidance for Capex includes.
The tuck ins.
That small tuck ins that we're talking about now if something.
Something more material than that.
Came across we would disclose it as acquisitions.
We had some in the fourth quarter.
We didn't have a lot in the first quarter. So it could it could be on top of that but.
Basically what we're seeing today is in the numbers and then.
Anything that could come up that is incremental to that would be in a separate bucket.
Got it.
It seems like people are right now worried about visibility of things changing.
Advertising budgets, but given the guidance and the Capex outlook it seems like you're.
So as we sit here today looking at a pretty positive outlook.
Support.
A lot of the trends you saw so far this year, continuing unless something dramatically changes how much.
Visibility do you feel like you have today versus I guess earlier in this year, just trying to get a sense of what trends, we should be focusing on for the rest of the year.
Sure. So our visibility is different depending on the geography and depending on the product line. So.
We have very strong visibility on our printed assets that have term contracts and that makes up.
A good chunk of our a good chunk of our revenue.
We have less visibility on digital campaigns, the least visibility on on the programmatic piece relating to that and then Europe .
And our other operations are all.
Somewhat somewhat later booking just given how the how the markets look so it's a it's a little bit of a different answer depending on which part of the business.
That you're that you're talking about.
I actually think visibility.
Where we sit right now it's better than it was the last couple of years.
And it may even be reverting a little bit because of it.
It's been a long term trend that our business cycle is shorter campaigns are shorter and more.
More people are coming in and out of the market.
I almost think we're getting a little bit of a.
We're in the midst of a little bit of a re rate on that because there is a lot of demand in people are keen to lock in key locations.
But I would expect that that trend will end up.
Resuming at some point I think that's also part of the Covid unwind. So I think the best indicator that we've got is just the dialogue that we're having with our advertising partners.
Both agencies and.
Actual brands.
And the dynamic there is that.
People are looking to reach consumers in the places that we have assets and the dialogue is really really positive right now.
Great. Thank you.
Thank you. Our next question comes from Aaron Watts of Deutsche Bank.
Your line is now open.
Good morning, everyone. Thanks for having me on the call.
A lot of ground. So I just had one question for you.
And perhaps this is a bit of a follow up on your prior comments, but I'm curious whether if.
The economies in the U S and Europe board of slowdown and pressure advertising at some point have the experiences learnings.
Kind of negotiations you have with your partners through the pandemic fundamentally changed or improved your ability to absorb.
React to temporarily reduced revenue level.
Yeah.
Thanks, Erinn I think Thats, a great question I'll give a little bit of my take on it and then get Brian a chance to take a whack at it as well and maybe Justin as well because it's a it's an interesting multifaceted multi faceted question.
But I think in the aggregate.
Our business continues to get more agile so the answer to your question. The simple answer to your question is yes.
It's been that's been something we've been working on for some time and we're and we're continuing to make good progress on it.
I think that depending on the nature of the disruption that you see.
Covid was COVID-19 was such an all hands on deck pervasive thing and governments were actually.
Instituting lockdowns.
Some of the lessons that we learned in that probably won't apply.
Because the next recession won't be like the last recession, that's always the case it would be.
But the fact that we've got you know.
Good muscle memory of mobilizing our forces to.
Go work on contact contract Renegotiations go work on.
So spending cost as much as we can.
And.
Figuring out how to bring in what revenue opportunity there is in the market as it exists.
It is also good but I don't know Brian is there anything you'd add I think that's that's pretty on top of it.
We've built pretty strong relationships and we always try to have good relationships with our Counterparties and I think.
That was tested and we really went through that during Covid era, but I also agree that.
There's private landlords, there's municipal quasi municipal counterparties given COVID-19 you are restricted from being able to do to some of the things that generate revenues. So I think there was a lot of.
Relief that came about because of that and an understanding that might not exist in.
And a more typical recessionary environment, but at the end of the day, we have good counterparties, we work with them we have good relationships.
And I think that as you said, we have good muscle memory.
Just curious as to your thoughts given the you've got a lot of contracts in Europe .
Do you kind of agree with what Scott and I said to you you kind of see some flexibility and a potential recessionary environment.
Yeah, that's exactly what you're saying.
You've been through a couple of years, where he worked very closely with all the deal counterparty.
The way through Covid, you've got some of them, even better and then I think on the revenue side on the agility flexibility point with Scotland I think that's key we can take booking flights that we can change the creative later with an advertising message change changes you can be more proactive and reactive to the advertising need. So I think that that allows us to be more competent and holding onto more revenue in the dance.
But yes. So the last couple of years has been an amazing drills.
Doing that definitely.
Okay very helpful. Thanks, guys appreciate the time.
Thanks, Eric.
Thank you next question comes from Jim Goss of bio.
Can research Jim Your line is now open.
Yes.
Good morning I.
I have a couple of questions. One is I was wondering if you.
You have noticed any shift in the usage of digital boards.
Over the past year or so in terms of say one advertiser buying the entire board and all usage versus the split among the various users and also.
The extent to which the digital boards are used for brand building versus immediate action, prompting.
Sure Jim I'll take a crack on on this one and I don't know Justin if there is if there is an angle I mean, it seems like it's a Billboard question, but we have an awful lot of digital in our our shelters in Europe . So maybe think about.
Your take as well if you have a different one.
But I would tell you that there has not been.
A big shift there are certainly advertisers that'll do what you're describing where they'll try to dominate a location and get all the slots are good.
Every other one or something something to that effect.
Theres nothing that I could point to that is.
Materially different than than Time's historical I think that one of the things we've gotten better at.
Is presenting to customers the ability to use the flexibility of digital.
To appear all over the marketplace and so not necessarily fixate on one location, but try to really fixate on a broader geography and maybe be on 30, 40, 50 signs around a greater DMA as opposed to focusing on one location and we're probably seeing a little bit more.
That sort of networks.
Type of activity.
But.
There has not been other than other than the embrace of programmatic, which is still as a percentage of the business relatively small there hasnt been a big change in customer behavior or use models I don't know just anything you'd call out different in Europe .
No I don't think it's been a it's been a big change.
As we build more digital and they get more reach and coverage. We can do a bit more of a brand built on that but at the same time I think the key is out of home can do both the brands and the sales activation because of because of the digital cost, especially now so I think theres been any particular change throughout the period, but I think we can do both.
Yes, okay.
And a couple of broader questions.
I was wondering if there is any opportunity our interest in <unk>.
Shifting mix of displays in European operations, especially versus the traditional street furniture emphasis whether changes in society is enabled.
Greater opportunities to shift shift from traditional.
And whether or not the strategic action review.
First of all any such consideration from a corporate standpoint.
And then on a related basis.
Does the does the existence of this strategic review for those operations.
Sort of enable or entice the U S operations from.
Doing anything from a broader strategic focus.
Aspect.
So Jim I'm going to ask you to clarify a little bit. Your first part of your question because I don't think I'm looking at Justin and Brian I don't think we're sure how to when you say.
Shifting mix do you mean going from street furniture to more malls or more airports are more billboards or or what what is just the near term.
Thank you Jose.
Yeah, I mean, I think traditionally street furniture that had been a big focus because of the nature of the.
Terrain and I just wondered if there are more opportunities for billboards, which are very profitable.
Or it could be miles or whatever else as you say.
Wonder if the mix is fixed the way it is or if theres been any transition to.
The inclusion of broader other types of displays.
Got it you have got suggesting you would take a take a crack at that.
Yes, so I think can be looked at and again, it's a broad range of countries across Europe . If you look at what we've seen I guess.
It lifts between going between different environments symbol between where the audiences on street furniture. So.
Through the pandemic, we had more people in local high speeds in some of the sensors at the big cities. So that just made so you sell to where the audience is so we can be really flexible around that but that was on street furniture just in different places if that makes sense. So I think one of the strengths. We've had is being able to go with new audiences.
And I think that continues to be the strength. So does that does that change what we do.
Really changed fundamentally too, but it makes us think about maybe pricing differently.
How we can both digital and they continue continued to convert digital units throughout the last couple of years, but I would say, it's more about where the audience is.
Rather than a shift between environments.
Yes.
Alright.
It relates to.
I was just thinking part of it might relate to the degree of profitability of the Billboards versus street furniture with a heavier physical investment it seems like that might be an opportunity. That's one of the reasons for the question, yes, the dynamics and product profitability by country are actually quite quite different and so it.
It is not the case that that the Billboard is the most profitable product in every country that is certainly the case here in the U S. It is not the case in every in every country.
But I'm going to I'm going to answer the second part of your question.
In terms of the way I interpreted your question, let me read it back to you first and then you can you can tell me if I've if I've got the interpretation right. It's basically has the strategic review in Europe caused us to do anything different in the U S or has it has it kind of frozen us or has it has it unleashed us.
Is that the spirit of your question.
Yes. It is.
Okay. So you know we are a disciplined organization.
That is always striving to be.
In front of the marketplace.
And so we are.
Constantly looking at opportunities that could be enabled.
You know it.
If and when a transaction were to happen in Europe .
We're a disciplined organization so we're not chasing off after those things.
You know before we have clarity on what's what's going to happen in it and so what I would tell you is that the.
The organization is absolutely thinking about how it evolves.
In a future state as a as a more streamlined organization, but.
But we have our eye on the ball and we are focused on delivering against the guidance that we've provided.
And.
We have it's a relatively small group of people within the organization that are sort of imagining those future states and laying the groundwork for it.
So I guess I'd characterize us as disciplined.
But poised so hopefully that answers your question.
Yes, good insight thank you very much.
Thank you Jim.
Thank you I'll now turn the call back to Scott Wells for any further remarks.
Okay, great well. Thank you all for all the questions that was a robust and.
Far reaching far reaching set of set of inquiries and hopefully we've been able to give you some insight to where we stand I think the key takeaway is we feel that this was a good marketplace that we're in.
We stand strongly behind our guidance and we feel good about how the year's developing from here and hopefully that that that message has been conveyed across all of our geographies and across all our products. Thanks for listening and we'll talk to you all soon.
Thank you for joining today's call you may now disconnect.
Yeah.
Okay.
Sure.
Okay.