Q3 2022 Clear Channel Outdoor Holdings Inc Earnings Call
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Keith.
I would now like to turn the conference call over to your host Eileen Mclaughlin Vice President Investor Relations. Please go ahead.
Good morning, and thank you for joining our call on the call today are Scott wells, our CEO and Brian Coleman, Our CFO , Scott and Brian will provide an overview of the 2022 third quarter operating performance of clear Channel Outdoor Holdings, Inc.
Clear channel International BV.
We recommend you download the earnings conference call Investor presentation, located in the financial section in our Investor website and review the presentation. During this call after an introduction and a review of our results. We will open the line for questions and Justin Cochran CEO of clear channel Europe .
We 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 its future financial performance and our strategic goals.
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 expectations.
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 do not conform to generally accepted accounting principles. We provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings release and the earnings conference call Investor presentation.
So please note that the information provided on this call speaks only to management's views as of today November eight 2022 and may no longer be accurate at the time of a replay.
Please turn to slide four in the Investor presentation, and I will now turn the call over to Scott Wells.
Good morning, everyone and thank you for taking the time to join today's call.
Our strong third quarter results were at the high end of consolidated revenue guidance, we provided on our last call and reflects the resiliency of our platform. The dedication of our companywide teams and the continued execution of our strategic plan as we detailed during our Investor day in September .
We delivered consolidated revenue of $603 million in the third quarter up 8% excluding movements in foreign exchange rates.
Continuing the trends we saw in the first half of the year. Our performance was supported by broad based demand from advertisers with notable strength across our digital footprint in the Americas and Europe .
We're progressing and giving our advertisers the kind of experience they expect from digital media, which we believe contributes to our growth now and in the future, we're making our solutions faster to launch easier to buy and more data driven in turn we believe we're performing very well during a difficult period for many AD delivery platforms.
As we noted during our Investor day, we believe digital is not just a growth driver. It's a revenue multiplier at the close of the third quarter digital represented less than 5% of total inventory, yes digital revenue accounted for 40% of our consolidated revenue and rose 20% during the period compared to the third quarter of.
Last year, excluding movements in foreign exchange rates.
Looking at our digital footprint in the U S. We deployed 34 large format digital billboards during the third quarter.
Adding to our total with more than 1600 digital billboards.
Bind with our smaller format digital displays in airports and on shelters, we have more than 4700 digital displays domestically at.
And in Europe , We added 366 digital displays in the third quarter for a total of 19200 digital displays now live.
As we expand our digital footprint, we're continuing to strengthen our data analytics offerings and build out a more sophisticated operational back end to the customer experience.
These investments are allowing us to attract a greater pool of advertisers, which bodes well for our longer term outlook as.
As an example of the dynamism of our platform I'd like to call out our airports team for the work they did developing a multiyear multimillion dollars partnership and sponsorship with Penn Fed credit Union. This first of its kind brand takeover of the concourse C connector at Washington Dulles includes a 4000 square foot digital media tunnel, it's really.
Something to see and we are working with Penn fed on further opportunities.
Looking at the fourth quarter, our business remains healthy and we are on track to deliver results in line with our full year guidance, we presented during our Investor day in September .
Ryan will provide an update on our guidance in his prepared remarks, but I want to take a moment to focus on what we are seeing.
As indicated in that full year guidance, we do expect growth to moderate in the fourth quarter as compared to the last few quarters, driven by tougher comps against a strong fourth quarter last year.
Since September we are not seeing a material change in advertiser behavior and.
In the U S advertising demand remains healthy and we remain on track to exceed our record revenue in Q4 2021 airports in digital continue to drive that improvement.
In Europe , our business also remains healthy and is on track to outperform Q4 2019 and is in line with a very strong Q4 2021, excluding movements in FX rates as we continue to benefit from the growth in our digital platform and the recovery in transit.
Bookings in pacing continues to be strong in northern Europe, particularly in the U K and Scandinavia versus pre COVID-19 levels. In 2019. However, there are still a few markets primarily in parts of southern Europe that haven't fully rebounded.
Looking further out we're keeping a close eye on business trends across our markets and so far our 2023 upfront in the U S is going well and we remain optimistic about our business.
Finally, we continue to conduct a review of strategic alternatives for our European business with the goal of optimizing our portfolio in the best interest of our shareholders with the resulting greater focus on our core Americas business, we will communicate further details as and when we are able.
And with that let me now turn it over to Brian to discuss our third quarter financial results as well as our fourth quarter guidance.
Thank you Scott good morning, everyone and thank you for joining our call.
Scott mentioned, we had another great quarter, and we believe our business is on track to achieve the full year guidance. We provided during our Investor day as you will see on slide 14.
Moving on to the third quarter results on slide five.
Before discussing these results I want to remind everyone that during our discussion of GAAP results. I'll also talk about our results excluding movements in foreign exchange rates a non-GAAP measure.
We believe this provides greater comparability when evaluating our performance. In addition, as a reminder.
Direct operating expenses and SG&A expenses include restructuring and other costs that are excluded from adjusted EBITDA and segment adjusted EBITDA to.
To avoid repetition.
Amounts I referred to are for the third quarter of 2022, and the percent changes our third quarter 2022 compared to the third quarter of 2021, unless otherwise noted.
Consolidated revenue was $603 million to a one 1% increase excluding.
Excluding movements and foreign exchange rates consolidated revenue was up seven 8% to $643 million at the high end of our consolidated revenue guidance range of $625 million to $645 million.
Net loss was $39 million, a slight improvement over the prior year's $41 million.
Adjusted EBITDA was $129 million down, 5% compared to $136 million in the third quarter of 2021.
Excluding movements and foreign exchange adjusted EBITDA was $131 million down three 8%.
Please turn to slide six for a review of the Americas third quarter results.
Americas revenue was $347 million up 9% and in line with our guidance range of $340 million to $350 million and even more significant we continued to surpass pre COVID-19 revenue levels with revenue up 6% compared to Q3 of 2019.
Revenue increased across all major product categories, most notably airport displays.
Digital revenue, which accounted for 39% of Americas revenue was up 16, 6% to $134 million driven by both airports and billboards.
National sales, which accounted for 39, 7% of Americas revenue was up 8% with local sales accounting for 63% of Americas revenue and up 9%.
Direct operating and SG&A expenses were up 12, 1%. The increase was primarily due to a 10, 2% increase in site lease expense to $114 million.
Driven by higher revenue, primarily in our airports business, partially offset by a small increase and negotiated rent abatements.
Segment, adjusted EBITDA was $145 million up four 1% with segment adjusted EBITDA margin of 41, 8% down from Q3 2021, primarily due to mix and as expected in line with Q3 2019.
Turning to slide seven.
This slide breaks out our Americas revenue into Billboard and other and transit.
Billboard in other which primarily includes revenues from bulletins posters Street furniture displays spectacular and wall Scapes was up two 6% to $280 million.
This performance was driven primarily by strength in our California, southwest and Midwest regions.
Transit was up 44, 7% with airport display revenue up 45% to $62 million driven by growth across the portfolio, including Port authority.
Now on slide eight for a bit more detail on Billboard and others.
Billboard and other digital revenue continued to rebound in the third quarter and was up six 8% to $98 million and now accounts were 34, 8% of total Billboard and other revenue an increase over Q2 <unk>.
Non digital Billboard and other revenue was up slightly.
Next please turn to slide nine for a review of our performance in Europe in the third quarter.
The commentary is on results that have been adjusted to exclude movements in foreign exchange rates.
Europe revenue increased six 1% to $279 million at the high end of the guidance range of $270 million to $280 million the.
The increase was driven by improvements in transit and street furniture display with revenue up in most countries, most notably, Sweden, partially offset by a decline in France.
Europe revenue was also up compared to the 2019 comparable period and the growth rate was higher than the increase we saw in the second quarter of 2022 versus the second quarter of 2019 adjusting for movements in FX rates.
Digital accounted for 48% of Europe's total revenue and was up 22, 4% driven by an increase in the number of digital assets and a strong rebound in demand in Scandinavia, including on our transit assets.
Direct operating and SG&A expenses were up five 6%. The increase was primarily driven by increased site lease expense, which was up 22, 1%, resulting from a $9 million reduction and negotiated rent abatements as well as lower governmental rent subsidies and higher revenue.
Segment, adjusted EBITDA was $18 million and the segment adjusted EBITA margin was six 5%.
Both down as compared to the prior year due in part to the one time reduction in site lease expense in the prior year.
Segment adjusted EBITDA margin was slightly ahead of Q3 2019 segment adjusted EBITDA margin.
Moving on to 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 CIBC.
Europe segment adjusted EBITDA.
<unk> profitability metric reported in our financial statements. It does not include an allocation of <unk> corporate expenses that are deducted from CCI. These operating income or loss and adjusted EBITDA.
Europe , and CCI BV revenue decreased $23 million during the third quarter of 2022.
Compared to the same period of 2000 $21 million to $239 million.
After adjusting for a $39 million impact from movements in foreign exchange rates, Europe , and CCI BV revenue increased $16 1 million.
<unk> operating loss was $14 million in the third quarter of 2022 compared to an operating loss of $26 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.
Similar to Europe by commentary on results that have been adjusted to exclude movements in foreign exchange rates.
Other revenue was up 19, 1% driven by improvements in most countries.
Direct operating and SG&A expenses were up 5% driven by higher site lease expense primarily related to higher revenue.
And segment adjusted EBITDA was $3 million an improvement over the prior year's breakeven segment adjusted EBITDA.
Now moving to slide 11, and a review of capital expenditures.
Capex totaled $43 million, an increase of $11 million compared to the third quarter of the prior year as we ramped up our spending particularly on digital displays in the Americas.
In addition to our capital expenditures I also want to highlight that during the third quarter, we made several asset acquisitions totaling $28 million in our Americas segment.
Now on to slide 12.
Year to date cash and cash equivalents declined 83 million to $327 million as of September 32022.
And during the third quarter cash and cash equivalents increased $13 million.
Adjusted EBITDA of $129 million and changes in net working capital contributed positively to our cash balance for the quarter and was partially offset by cash interest payments and net capital investment.
Our debt was $5 6 billion as of September 32020 to a slight decline from 2021 year end, primarily due to scheduled quarterly principal payments on the term loan facility.
Cash paid for interest on the debt was $56 million during the third quarter, an increase of $4 million compared to the same period in the prior year, primarily due to the higher floating rate interest on our term loan b facility.
Our weighted average cost of debt was six 5% an increase from year end due to the increase in LIBOR rates.
Our liquidity was $543 million as of September 32022 down compared to liquidity at year end, primarily due to the reduction in cash.
As of September 32022 are first lien leverage ratio was $4 nine eight times well below the covenant threshold of seven one times.
Turning to slide 13, and our new metric <unk>.
As you May know during our Investor day, we introduced a new metric for the company adjusted funds from operations <unk>.
In the third quarter, we generated $24 million and year to date $91 million of <unk>, excluding movements in FX rates.
Moving on to slide 14, and our guidance for the fourth quarter and full year 2022.
As Scott mentioned, we haven't seen a material change in advertiser behavior, and we are able to confirm that our fourth quarter revenue guidance is expected to be within the guidance range. We provided during our Investor day on September eight.
Our only update to our fiscal year 2022 guidance is consolidated net loss, which increased primarily due to movements in FX rates.
Won't read through all the line items on this page, but do want to highlight a few updates to our guidance.
We believe our consolidated revenue will be between $740 million and $765 million in Q4 of 2022, excluding movements in foreign exchange rates.
Americas revenue is expected to be between $370 million and $380 million.
Additionally, we believe Americas segment, adjusted EBITDA will be at the low end of the provided guidance range, primarily due to uncertainty around the timing of certain anticipated rent abatements as well as softer performance in programmatic.
Europe's revenue is expected to be between $345 million and $360 million excluding movements in foreign exchange rates.
Just on Monday October exchange rates foreign currency could result in a 15% headwind to year over year reported revenue growth and Europe's fourth quarter. Additionally, our cash interest payment obligations for 2022 will remain at $341 million, including $124 million and the remainder of this year.
However, cash interest payment obligations for 2023 are expected to increase to $404 million as a result of higher floating rate interest on our term loan b facility.
This guidance assumes interest rates remain at current levels and that we do not refinance or incur additional indebtedness.
Lastly, I do want to touch on 2023.
Our visibility into 2023 is limited and we are well aware of concerns regarding the macro environment next year. However.
However, we have proven our ability to pivot and prior recessionary periods, including in 2020 with the pandemic and believe we know how to quickly adjust our expenses and preserve liquidity if needed in the future.
And now let me turn the call back over to Scott for his closing remarks.
Thanks, Brian .
Our business remains healthy and we're confident in our strategy and optimistic about the growth opportunities ahead for us.
I'd like to thank our entire team for their dedication in executing on our strategic priorities, including accelerating our digital transformation, improving customer centricity and driving execution excellence.
We believe these efforts are enabling us to strengthen our competitive position and to capture a greater share of advertising budgets in the future.
And now let me turn over the call to the operator for the Q&A session and adjusted Cochran, Our CEO of Europe will join us on the call.
Thank you.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad.
If you change your mind, please press <unk>.
The first question, we have from the phone lines today comes from.
Stephen Cahill with Wells Fargo. Please go ahead your line is open.
Thank you good morning, everybody could you talk about the overlap between digital customers and print customers that youre seeing in Americas.
It just seems like the digital spend it's really growing nicely to that near 40% level. So is that incremental from existing out of home advertisers or do you have any sense if youre seeing.
New customers, who are digitally kind of digital only come into the market and based on that growth do you have any expectation to increase your digital Capex in 2023, and then I've got a follow up.
Okay, Steve Thanks for the question.
Digital digital is interesting in the answer to your question is all of the above.
We definitely have I think the thing that has brought the new to the category buyers more than digital has been programmatic I think thats, where we've had more new to the category buyers come in.
Digital really since we started doing it has been.
Partly incremental but also partly amplification. So we have a lot of clients that will buy.
Print campaigns, and then use digital to supplement them and to do calls to action and to do things that only digital can do and a lot of the current success Youre seeing with digital is because.
In our modern airport build outs digital is such a central part of what we do.
It's really taking off in that in that airport sector.
So.
It's really the customer and the customer base, it's hard to say that it's any one thing, but it's pretty broad as far as your second part about capex.
Really on the roadside part of the business, we are really not constrained that thats been paced more or less at our ability to navigate regulations and get the ability to do the conversions.
Is something that is a regular part of our discussions and if you if you interviewed.
Our regional managers and branch presidents.
They would tell you that theres a lot of emphasis on finding great locations to convert to digital but that's not really particularly different than its been but let's go ahead with your next part of your question.
Yes, thanks for that.
The next part would be just about the airport revenue I was wondering if you have historical data of how airport tends to perform in a recession I think it's still getting back to kind of pre COVID-19 levels. So travel is still seems like its pretty strong is your expectation.
<unk> turned over to the airport kind of do better than the rest of the portfolio to do it a little more cyclical than the rest of the portfolio and then maybe just lastly, just wondering if you expect much in the way of rent abatements for 2023. Thank you.
Sure sure so so on airports.
It's a really good question because really the airports since we have them are quite different from any prior.
Prior cycle other than maybe COVID-19.
And what I mean by that I referenced before how much digital has become a central part of them. If you go back to the great financial crisis, or the 911, which would have been the two.
Big disruptions to airports in recent history print was much more part of the business.
And.
Sure.
Just behaves differently than digital does as we've seen across across the <unk>.
The spectrum I do think the thing that has come out of Covid is that advertisers who came back early have really seen impact from the airport campaigns and I guess the thing that I'd really emphasizes that it's not only that that the assets are different but how we sell them or structurally different.
A meaningful chunk of the revenue in airports is.
It's coming from our local sales team that was not the case in prior recessions.
And one of the questions I get as I go around the country as people asking for airports and their communities.
Because it's becoming an attractive.
Area for account executives to find big customers, who want to do.
<unk> things.
And I think that so so we're selling a good part of it through our local branches. So its more diversified sales base and we're also doing a lot more like what I referred to in the.
Opening comments like with Penn Fed, where we're actually doing things that are more akin to sponsorships and advertising and so I think that there are.
The degree to which it's digital would be something that you could look at it and say well that's going to be responsive in a recession, that's going to be reactionary recession on the flip side the broader sales base the broader customer base, because we've done a good job of expanding that and the proliferation of sponsorships makes it.
A bit more sticky so.
Hopefully that gives you gives you a flavor and on abatements.
We are still working through some I think we characterize that as in.
In Europe , we probably are done with anything thats going to be forthcoming.
Relating to Covid.
In the U S. We have a tail of things that we are still working in.
There'll be nothing like they were in terms of magnitude that they were in 'twenty, one or even even this year. So hopefully that helps thank you Steve.
Thanks Scott.
Thank you.
We now have.
Ben Swinburne with Morgan Stanley . Your line is now included.
Thank you.
Good morning, everyone. Scott I was wondering you talked about programmatic being a key tailwind to digital adoption digital growth, but I think you also cited it as a maybe a source of weakness among your channels this quarter.
We've heard that from a number of players around media.
Is there anything more to that in your mind and just that's where it's easy to dial it up dial it down or do you think there's other things that are either that's telling us about where the broader business is headed or are there things that you think you can do with your programmatic channels to maybe improve either market share or sort of the stickiness of the <unk>.
Love to get your thoughts on that as we're all trying to read the tea leaves.
Yes, and Ben Thats, the exact right characterization, it's still very much in the tea leaves stage with programmatic I don't think that we are anywhere near.
We are not near a steady state.
Just this year the trade desk and DB 360 have gotten involved in out of home programmatic in a meaningful way and there's a couple of the biggest omnichannel DSP is what their impact is going to be on this space I think is still very much an unknown.
When I look at what's gone on this year I think there is there is a few things that have happened in out of home programmatic I mean, I think first and most obvious is what you said, which is it's the super easy channel to turn on and turn off and where people are doing more promotional spend.
That's something that they may be dialed back quicker and that we've seen in some of the mainstream digital advertising.
Parties that they have seen that that impact.
On the flip side you have.
A lot of that.
The programmatic space.
Out of home greatly expanded this year in terms of the number of screens. So if you looked at the screens available for digital out of home in January of this year and you looked at it now you would see a massive amount more screens available and a lot of those screens are in places that were hit extremely hard by Covid and.
So part of part of why I.
Think what kind of happened is that the roadside programmatic came back first and then over the course of this year you've had.
Mall base, then elevator base, then Jim based all the other kind of locations that out of home happens.
<unk> has had.
A better a better run and that was particularly true in the first half I'm not sure.
I don't have my finger on the pulse of exactly what what they're seeing but that proliferation of screens is something that I think has to get normalized in the marketplace has to sort out how it thinks about the different types of out of home programmatic and we're still again very early innings of people getting understanding of it.
And then I think the last thing I'd call out in addition to roadside being first to really take off.
Out of Covid.
Programmatic.
Q4 of last year was just a monster quarter, it's hard to synthesize it remember it even right now with the year that we've had from a macro perspective and all of the different concerns that have come up whether it's more inflation or recession or interest rates I mean pick your pick your list.
But Q4 of last year programmatic was absolutely positively on fire and that is that's probably I'm sure we're going to talk a little bit about our relative pacing heading into Q4, but thats one of the big drivers.
Why we're not seeing it's not that it's shrinking.
It's not shrinking a lot. It's the jury is out on whether its going to whether it's going to grow much or not but it's certainly not having the kind of.
Tailwind that it had last year. So hopefully that gives you some some insight into what's going on in programmatic.
Yes, no that's really helpful.
And then I don't know if Brian I don't think you mentioned this in your prepared remarks, but just now that we're three.
Three quarters into the year.
Any update on sort of free cash flow expectations for the full year, which I guess is essentially asking about working capital with with three months left or anything else do you think we should be thinking about.
Yes.
Anything incremental to add to what what kind of guidance and information we put out there I mean I think we continue.
Operationally show show improvement, we've got a bit of a headwind with.
With interest rate increases because we do have some variable rate exposure.
And so that may delay kind of the point, where free cash flow positivity comes into play but.
But we're looking to continue to grow the business, even with the headwinds are out there and I think 2023 will be a big year for us.
Thank you.
Thank you.
Well, Dan Zeff with Cowen. Please go ahead, when you're ready.
Hi, Thanks, guys for taking the question and nice job on the quarter.
Wanted to go back to airport advertising would you say that just across the industry.
Advertising has returned faster or slower than the pace of actual airport travel and really what I'm trying to get at here is just simply do you think you have much of a tailwind left and putting putting aside any possible recession. Do you think you have much of a tailwind left to the extent international business.
Travel continues to rebound.
Thanks, a lot yes, it's a good question and I think you've heard all of the out of home.
Transit oriented operators talk about the.
The audience doesn't have to get back to a 100% of of where you were to have.
The AD dollars get back and it's a little different in the different types of transit, but I'd say that's been true certainly our results would say that's been true in airports we are back.
At 2019 levels in many of our airports.
<unk>.
But the AD revenue has probably come back its come back a little bit faster than the passengers have I think I think the airport advertisers are pretty savvy to this in terms of looking at the expected passenger trends and the expected travel trends and I think one of the things, particularly for airports that has resonated with people is that even.
If they're not business travelers on business travel.
The audience in an airport has a lot of business decision makers.
Typically and so for the <unk>, particularly.
Audience that that's been a strength so.
I don't I don't know that I'd characterize I mean, if you just look at it it mechanically our comps on airports are overlapping now really really with Q4. It kind of is full on overlapping a.
Full full bore kind of quarter in terms of airport performance, So where we had triple digit growth in airports early this year youre not going to be seeing that.
Going forward and it's going to be part of our overall.
Percent growth slowing a bit as things go but it doesn't actually mean that.
We're taking a step back it just means that the relative growth rate is lower.
Okay, and then just one last one for me if I could which is in the Americas on the static side barely grew in the quarter and I'm wondering was there anything in particular to depress growth there or is that sort of the new normal or static I mean is there just kind of little to no growth going forward or was there.
Third quarter is somewhat of an anomaly.
Or is this just moderating advertiser demand global macro headwinds.
It's definitely not the last one.
What I'd say is we've talked all year I think I've talked to you a couple of times about this about about insurance one of a.
A couple of the insurance players that have been way way way down this year and including Q3 relative to 2021.
Was it a big print advertising.
Advertiser and so that that has been a headwind for that type of inventory all year, we feel good about what we're doing with our printed assets. We feel like there is good advertiser demand, we've got opportunity to backfill some of that we maybe didn't get quite as much of it.
Q3, as we would've liked as I look across the system.
We're in a more.
I hate to use the word normal because theres not a lot normal about these times, but it's a little bit more of a normal dynamic.
In that what you have are big city versus small city versus medium city dynamics, you have east coast versus west coast versus southwest dynamics.
<unk>.
In the set up when you look at printed it is a very different story in the northeast where it's not a good story versus say in California, where it's quite good story and.
So I'd say that the fact that it's sort of flat is just a little bit of an artifact of of a moment and probably not anything to read a trend into.
Very helpful. Thank you.
Thanks Lance.
We now have the next question from Alan.
H Bank.
Please go to Hudson you may begin.
Everyone. Thank you for having me on Brian just a follow up on your comfort level with liquidity as we roll into 2023, just given the macro concerns.
That service you highlighted.
And maybe you can just also comment on the working.
Working capital returning to a more normalized patterns in 'twenty three.
And Relatedly your revolvers lines on you mentioned in your seven one times covenant and remind us what restrictions on our behalf.
Yeah.
Sure look I think on liquidity, we continue to feel good.
We obviously will keep a.
<unk>.
Liquidity levels.
A little bit about rising interest rates and higher cash interest expense and so that's certainly something.
That is a headwind that we'll have to we'll have to keep our minds on.
But operationally things feel good all things all things considered and so I think we feel good about our liquidity position I also do think as we get into 2023, you will see a normalization of working capital back to <unk>.
Generally back to pre covered levels now keep in mind, we have significant seasonal working capital fluctuations.
Piggybacking off an earlier question.
Q4 is a strong quarter for us, but we actually don't collect a lot of that revenue into Q1, which is a weaker quarter for us you'll see a big working capital shifts there.
But.
I do think generally we feel pretty good but it is a volatile environment and so we want to we want to make sure that we stay on top of things.
Key to that is availability under our revolvers that are currently undrawn.
We use them for letter of credit purposes, but we have significant.
Undrawn liquidity capacity, there and we only have one financial covenant and that's the one you spoke of so that first lien leverage ratio.
We're just under five times the covenants.
Seven one times currently and so there's plenty of room, there and so.
We've got we've got liquidity capacity in the form of cash we got liquidity capacity in the form of availability under our cash flow and our ABL revolver.
I think we're feeling pretty good about where we all where we are all things considered.
Alright, Thats really helpful. Brian . Thank you for that and I don't know if I can get.
Anything on this but with regards to the strategic review.
Focus remain on select geographies in Europe versus sort of the whole pie and have any talks to move to an advanced stage.
The obvious headwinds in the capital markets and the macro backdrop.
Yes, Youre right I can't I can't say a lot about about that one I mean, I would just say that the message that we gave at our Investor day in that we sort of referenced in the the.
The conversation early on the comments the prepared comments.
Stan.
We're looking at a subset of the businesses.
We're focused on optimizing shareholder shareholder value in the reality on dealmaking environments.
Yes. This is a tough one but when you have assets that are interesting and you have counterparties that are motivated to anything is possible and I can't speak to any specifics but.
We're committed to giving the street updates as and when we have anything material that we can say.
Okay. Thank you appreciate the time.
Thank you.
Yeah.
Thank you.
So J J P. Morgan. Please go ahead when you're ready.
Hi, I wanted to follow up on programmatic, you've talked about it being kind of back end loaded in the quarters in the past was it more soft throughout the entire quarter.
Versus back end loaded.
So so programmatic.
Every every quarter has a little different seasonality to it there are certain months of the year that are that are sort of spiky months.
Like for instance may might actually be a heavier month or in June and a demand profile certainly in Q4 December is.
<unk>.
The bellwether or on the.
Seasonality in quarter, if you will.
But.
We're at a point, where we can actually understand something of what the demand environment is based on our daily sales with it so I mean.
It's a business that's really unlike the rest of the outdoor business, it's more of a.
Volume retail business, if you will where you can kind of look at your weekly sales and get a sense of.
Okay. This week is like way below where it should be or this week is way above where it should be in kind of discern the trends.
From that so.
And we have the.
Added visibility that we get by having a sales force that's out talking to people about campaigns that we do get some some modicum of a pipeline, but it is it is typically it is typically heavier at the ends of the quarters.
<unk>.
This year. It has been it has been more subdued, but we've had months that beat 2021, and we've had months that are.
Yeah.
Out of 20 of those behind 2021.
So far this year are adding up to a kind of flattish experience.
Overall in it for us I mean, thats about as much details I think I can get probably a little more than I even should.
Okay.
Great.
Thanks for the color on the in terms of the static.
Billboard.
Market.
Can you talk a little bit about what youre seeing maybe your top markets in tier one cities versus maybe some of the smaller is there any difference there.
Between the demand or pricing.
So I mean, it's interesting.
You you think of tier one cities and you start marching down <unk> and you do you think it's just going to.
Stair step.
According to how big and how developed there it's actually that's not at all the market environment. So the interesting thing in the environment and this is not unprecedented in out of home you have kind of L. A and New York, which are their own thing.
And both of them have higher penetration of out of home in media mix than other other cities do.
Both of them.
Our cities that drive.
The economics are at least some of the big players.
In the space.
They're they're behaving very strongly as you get to the next wave of Big cities, though a lot of those big cities are not.
Are not as strong and it's it's there's a demand part to it just in terms of you can't you can't underestimate the value of having the weight of media and social Influencers and entertainment.
In those couple of real top markets.
And then you go and you look at the bottom end of market size within our portfolio. We don't go that small, but our strongest performances, particularly in printed.
We are in the smaller markets with smaller and mid sized markets Thats and thats a function of supply and demand and it's a function of those economies are all pretty healthy.
They continue they continue to perform so you saw in our numbers are very balanced local national performance.
And thats, probably at some level just because we don't have as much inventory.
In the in the Mega National locations, particularly in New York.
As we as we ideally might.
Order to benefit from the strength in the in the kind of top two markets, but it is.
It's an interesting market I think one of the other players talked about that's about.
<unk>.
Mid sized is better than the smallest of the small.
Our sweet spot is just it's always moving in right now it's kind of in that.
Upper mid sized city has just good demand environment.
Great and last one for me.
Analyst day long term guidance was four 4% to 6% is there any reason to think that next year wouldn't be in that range.
Yes, we haven't made any adjustments to the guidance beyond what we said Richard so, but we're also not giving a 2023 estimate I think it's important for us not to not to lock in not to lock in too much because theres still an awful lot for us to learn we're really in the early inning.
<unk> of our upfront it is going well as I said in the prepared comments.
But by the time, we're talking in February we're going to be able to give you a much more wholesome picture of what the year looks like Oh that's.
That's fair I didn't realize it was 2023 I.
I thought he was asking.
You are right I think youre right, yes, my apologies. So we talk about 2022, we won't come out with 2023 until sometime in the future.
Yes, it was doing three thank you.
That's it for me.
Yeah.
We now have.
Jim Goss of Barrington Research. Please go to Hudson you may begin.
Alright, thank you.
Actually I did want to talk about Upfronts I Wonder if you could characterize.
Various aspects of it.
And the way you approach it in terms of its share of the revenue base Thats involved.
Timing the range.
So and the pricing and.
To the extent there are.
Sort of make goods exposure, if you will how you satisfy that.
Yes, so loaded loaded with data points in there Jim.
That's a big question and I think I'll start with saying that we call them upfronts for lack of a better word but just for all of the media analysts out. There. This is not at all remotely like the TV Upfronts, we don't have.
A week, where everybody is in town and there is big events.
Lots of them.
Announcements about new content. This is what this is is this is the season, where we go through our Perm renewals and.
I don't think we've given a ton of detail on on the Perm, but I think you can kind of figure it out from and this is a U S phenomenon. Let me just be very clear about that too. So this is a there's a U S thing and its not at all like the TV thing.
And we've never we've never really given too much to mentioning on it but.
Rough justice.
Half the business.
And that sort of things that have longer than six month contracts ish.
It's something we're going to start giving a lot more disclosure on but I don't think theres a lot of harm and giving you a rough feel for that and what happens is we're on a we're on a cycle.
Most of our marquee assets, which would be the things that are most relevant for firms.
We have backup customers lined up and we have multiple paths to getting occupancy on them and so when if let's just say the renewal as a December 1st renewal will start working that December 1st renewal over the summer.
And try.
Try to get a feel for whether the advertiser. That's currently incumbent is on.
For the next year.
See what they think of the price increase that we're going to put forward, which.
Tends to be something that we look at relative to what's going on in the economy as well as <unk>.
Traffic growth rates, which generally only move in a in a positive direction.
And so youll go through you'll go through a process with them.
And.
Sometimes they will opt out and you will then go to your backup advertisers and kind of fundamentally repriced the asset which is usually advantageous to us versus.
Continuing with the existing customer but.
We do strive to have the existing customer.
I'll pick up the tab.
For things that are our underlying cost growth so.
If such a diverse array I mean, youre talking about things that.
You could have a perm on something that is six figures of revenue a period for one location.
Two a perm on something that is for figures. So the negotiation is it's different sales forces. It's different parts of the team it's different levels of executive involvement that come into play with it.
But that's kind of that's kind of what happens during our upfront and we keep close tabs, particularly on.
The top 15, 20% of our inventory and we look at trends in terms of are we getting good rate increases are we getting good renewal rates.
Et cetera, and what I characterize it is going well kind of a month and thats really what I. That's what I mean is that we are seeing healthy increases, we're seeing healthy demand and.
We will be watching this and working with us very hard over the next few months.
Okay.
Very helpful. Because it certainly helps improve.
Since you have in the projections you.
Give all of us.
That's why and that's why we kind of hold off till February to give the look at the full year.
Because of that then we will have.
A good part of our business already booked.
Okay.
Another question.
Hi.
Without going too far down the road of Italians I knew potentially split up asset. So I wonder if there would be some organizational structure that might differ.
For example, if.
You have fewer international markets.
Each of them be separate markets, let's say, probably don't interrelated all that much.
The nature of your business and would that be a level of.
Management and cost.
You might be able to.
Tom is the savings.
And it does whatever structure you come up with some impact in terms of the.
That you have.
Internationally.
Sure so.
A couple a couple of thoughts on that with all the caveats that I gave Aaron about there's just so much we are able to say.
It's definitely premature to talk too much about structure.
Until we have divestitures, but I would assure you we have a plan. If we are able to do the divestitures that we do we will absolutely have structural savings.
Probably wouldn't operate the way you suggest because.
The way that it makes sense to have an in region.
<unk> CEO for what what asset base, we have left it's not going to be a a teeny tiny stuff, it's going to be a meaningful chunk of business that are meaningful.
I'll just leave it at that.
Should we should we be successful in the in the endeavors that we're in so I do think I do think that there would be there would be savings.
But it's definitely premature to speculate on.
On the structure and there was another part of your question I think I lost it as I was trying to think through how I was going to answer that first part without getting in too much trouble.
It can make then with respect to the.
Yeah, Yeah, Yeah, I'll talk to that.
I think whatever we do is going to be compliant with the indenture. So I wouldn't I wouldn't anticipate any significant structural changes because it would likely be limited.
By the intention as long as Theres debt outstanding.
I think the only other thing I would add is if.
If and when things do continue that could create some reporting differences, but until that happens.
I don't envision that either.
Okay, and the last thing M&A Hasnt come up yet.
It should be at the top of your list right now.
How do you view property availability in this stage of the cycle.
And the economy and your feeling as to your capacity to take advantage of opportunities you might see.
So I'd say a good dividend.
Yes.
Yes.
Yes, yes.
So there is definitely still.
Willing willing sellers and willing buyers I think you've seen all of the U S.
Based out of home companies have had a pretty pretty active M&A agenda.
For us.
We need to keep an eye on that liquidity question that has come up in a couple of different ways as we went.
Obviously, all things balance sheet related come into come into play on it.
I definitely think it remains a.
Good environment.
Tom.
To transact, but obviously with credit markets like they are.
And with the macro what it is we're going to be keeping a very very careful Lyon to the words you said, it's not the top of our list of things that we need to be doing but at the same time, we want to make sure that we're not missing out on assets that would be a great fit with our with our platform.
Alright, thanks very much.
Thanks, Jim.
Thank you.
Do you have any further questions on the line so I'd like to hand, it back to the management team for any final remarks.
Great. Thank you. Thank you very much we appreciate the questions. We appreciate everyone's interest.
Good about the business and we're we're looking excited to finish the year strong in two.
2023 set up to be a year of growth for us. So we're.
We're very optimistic about where things are headed and we appreciate everybody's time and have a great day.
Thank you for joining that does conclude today's call.
Thank you you may now disconnect your line.
Yes.