Q4 2022 Clear Channel Outdoor Holdings Inc Earnings Call
Speaker 1: Ladies and gentlemen, thanks for standing by. Welcome to the Clear Channel Outdoor Holdings in 2022, of course, at earnings conference call.
Speaker 1: If you would like to register a question, join the presentation and you may disturb by pressing star one on your telephone keypad.
Speaker 1: Now I'll turn the conference over to your host, Eileen McLaughlin, Vice President of Investor Relations. Please go ahead.
Speaker 2: 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 fourth quarter operating performance of Clear Channel Outdoor Holdings, Inc. and Clear Channel International, D.D. We'll be right back.
Speaker 2: 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 review our results, we will open the line for questions and Justin Cochrane, CEO of Clear Channel UK and Europe will participate in the session.
Speaker 2: state men's involved risk and uncertainty and there can be no assurance that management's expectations, beliefs or projections will be achieved or the actual results will amount to some expectations.
Speaker 2: Please review the statements of risk contained in our earnings request release and our filings with the FCC. During today's call, we will also refer to certain performance measures that do not perform to generally accepted accounting principles. We provide schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis.
Speaker 2: as part of our earnings release and the earnings conference call investor presentation. Also, please note that the information provided on this call speaks only to management's views as of today, February 28, 2023, and may no longer be accurate at the time of the replay. Please turn to slide 4 of the investor presentation.
Speaker 3: 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 fourth quarter results capped off a strong year for our company as we soundly rebounded coming out of the pandemic and benefited from healthy demand for our digital assets.
Speaker 3: We generated consolidated revenue of $750 million, excluding movements in foreign exchange rates. In line with our guidance, and up approximately 1% is compared to our very strong performance in the fourth quarter of the prior year. Our consolidated revenue was also ahead of the fourth quarter of 2019, excluding movements in foreign exchange rates in China.
Speaker 3: We delivered a record revenue quarter for our Americas business against a record performance in the fourth quarter of the prior year. Our European business also delivered strong revenue results, despite European turbulence and the ongoing strategic review of our businesses in Europe . For the full year, consolidated revenue was up 16.5%.
Speaker 3: Thank our company-wide team for their dedication and hard work in executing our strategic plan and contributing to our results during the past year. We operated at a high level as we progressed in our transformation into a technology fueled visual media powerhouse reaching a growing pool of advertisers.
Speaker 3: and we did this while improving productivity. Our story is both an operating one in terms of our efforts to increase revenue, drive further dams in productivity, and increase operating cash flow. It's also a capital structure one in terms of our focus on evaluating all options to improve our leverage ratio.
Speaker 3: and reduce our debt. On the operating side, investing in our digital transformation remains central to our plan, including expanding our digital footprint, strengthening our data analytic offerings.
Speaker 3: and continuously improving the customer experience.
Speaker 3: We believe we are elevating our ability to provide our clients with the kind of experience they expect from the digital media, coupled with the match reach of out of home.
Speaker 3: and our experience to date tells us these efforts are leading to growth. During the fourth quarter, Digital accounted for 43% of our consolidated revenue, which rose 4% during the quarter compared to the fourth quarter of last year.
Speaker 3: excluding movements and foreign exchange rates. As we expand our digital footprint, we're continuing to develop a more addressable and efficient operating platform. We're making our solutions more data-driven, easier to buy, and faster to launch.
Speaker 3: These initiatives are allowing us to convert more revenue to cash flow and better leverage our scale and reach, while demonstrating results in ways that elevate the attractiveness of out-of-home advertising.
Speaker 3: We believe these efforts supported our out-performing that's relevant to the majority of other traditional media platforms in the past year. As we execute on our plan, we believe we can drive improved operating cash flow over time given the operating leverage and strong fundamental inherent in our model.
Speaker 3: as shown in the long-term guidance we provided last September and are confirming today. Beyond operating execution, we're also committed to continuing review avenues that will enable us to establish an appropriate capital structure that we believe maximizes the value inherent in our business.
Speaker 3: At the close of the year, we announced the definitive agreement to sell our business in Switzerland for $92.7 million, which remained subject to previously disclosed closing conditions. We intend to use the anticipated net proceeds to improve our liquidity position, while our strategic review of our low margin and low priority European businesses remains ongoing.
Speaker 3: As we have previously exercised, we cannot guarantee the timing or success of our efforts, and we will continue to communicate further details as and when we are able.
Speaker 3: Turning to the year ahead, our business remains healthy with revenue expected to reach between 2.575 billion and 2.7 billion.
Speaker 3: excluding movements and foreign exchange rates. In the US, we're wrapping up the best upfront since we started measuring and our premium locations are strong, although a few categories are reducing our delay in campaigns.
Speaker 3: And as a reminder, the first quarter face is tough counts with the prior year. Specifically, on a national basis, we are seeing softness in the first quarter due to crypto and emerging tech companies pulling back on significant spending, and we're all through to the first quarter of 2022.
Speaker 3: So at this point, we're not seeing any major changes from a macros load-end. Rather, the impacts we're seeing relate to dynamics within specific categories.
Speaker 3: Dialoges with advertisers remain very constructive, and in fact we are continuing to develop new categories and broaden the universe of advertisers we can pursue.
Speaker 3: In Europe , we've maintained some of the momentum we've done Q4, and we're seeing healthy demand with no indications of a slowdown due to macro concerns.
Speaker 3: Based on our conversations, brand owners have indicated that they will continue to advertise as they recognize both the need and opportunity to remain visible.
Speaker 3: I should note that we also have an easier cop in Europe given all markets hadn't fully rebounded in last year's first quarter. So overall Europe is off to a good start and January came in marginally better than our
Speaker 3: As we execute our plan, we are keeping a close eye on trends across our markets and remain optimistic about our business.
Speaker 3: Brian will provide our guidance for both the first quarter and the full year. And with that, let me now turn it over to Brian . Thank you, Scott. Good morning, everyone. And thank you for joining our call.
Speaker 3: We'll provide our guidance for both the first quarter and the full year. And with that, let me now turn it over to Brian . Thank you Scott, good morning everyone and thank you for joining our call. Please turn to slide five.
Speaker 1: It has been a good year for our business and so before going through our fourth quarter results, I want to comment briefly on the full year results. As you know, we provided detailed guidance for 2022 during our investor day, which was updated on November 8th. I want to point out our actual results or in line or ahead of guidance for every metric included in the guidance.
Speaker 1: And my view is clearly demonstrates the resiliency of our business and the team's ability to remain on course and rebound from the pandemic.
Speaker 1: Now on to fourth quarter with what it results. As a reminder, during our discussion of gap results, I'll also talk about our results excluding movements and forms, change rates, and non- GAAP measures . We believe this provides greater comparability and evaluating our performance.
Speaker 1: Direct operating expenses and SGA expenses include restructuring and other costs that are excluded from adjusted EBITDA and segment adjusted EBITDA.
Speaker 1: And the amounts are referred to up with a fourth quarter of 2022, and the present changes are the fourth quarter of 2022 compared to the fourth quarter of 2021 unless otherwise not a bit.
Speaker 1: Additionally, Switzerland, which is now considered an asset held for sale, will continue to be reported in revenues and adjusted either-daw until we conclude the sale. During the fourth quarter, we expanded the number of segments in our order results.
Speaker 1: We now have four reportable segments, America, which consists of our U.S. operations excluding airports.
Speaker 1: airports, which includes revenue from the U.S. and Caribbean airports, Europe north, which consists of operations in the UK, the Nordics, and several other countries throughout Northern and Central Europe , and Europe South, which consists of operations in France, Switzerland, Spain, and Italy.
Speaker 1: Our remaining operations in Latin America and Singapore are disclosed as other. Given the guidance we provided as part of our third quarter results within our previous reporting format, this morning's presentation and our fourth quarter earnings release used the prior segments of comparability.
Speaker 1: However, the 10K we filed this morning include results for the fiscal years into 2022, 2021, and 2020 using the new segments.
Speaker 1: Consolidated revenue for the quarter was $709 million, a 4.5% increase.
Speaker 1: excluding improvements in foreign exchange rates, consolidated revenue was 0.9% to 750 million at the mid-range of our consolidated revenue guidance of 740 to 765 million. Net income was 99 million, an improvement over the prior year's net income of 66 million.
Speaker 1: Adjusted EBITDA was 205 million.
Speaker 1: down 7.6%. Excluding women's informed exchange rates adjusted the EBITDAI was 200, 14 million.
Speaker 1: down 3.5% as expected, primarily due to lower repayments as a result of the rebound in the business. AFFO, which is a metric we introduced recently, was 84 million in the fourth quarter, and 93 million is squitted movements in foreign exchange rates. Please turn to slide six.
Speaker 1: for review of the America's fourth quarter results. America's revenue was 374 million, about 28 percent, in line with our guidance range of 370 to 380 million, and even more significant, we continue to surpass pre-coded revenue levels.
Speaker 1: with revenue of 8.5% compared to Q4 2019. As Scott mentioned, this was a record revenue quarter against a record performance in the fourth quarter of last year. Revenue was up driven by airports and digital, partially offset by lower revenue from printed formats. Digital revenue, which accounted for 42.1% of America's
Speaker 1: benefited from PINTH up to MAND and a few large campaigns from brand owners at a pullback spending.
Speaker 1: Local sales accounted for 59.4% of America's revenue and continued to deliver growth up 3.4%.
Speaker 1: Direct operating in SGNA expenses were up 8.1%. The increase is primarily due to an 18.2% increase in site lease expense to 132 million, driven by higher airports or the new contracts and lower renovations. This is partially offset by more variable incentives compensation.
Speaker 1: Second adjusted EBITDA was 156 million. Down 7.9% the second adjusted EBITDA margin of 41.8%. Down from Q4 2021 do primarily to mix in one time items. However, America's margin was more in line with Q4 2019 as expected. Turning this slide 7. This slide breaks out our America's revenue to build more.
Speaker 1: for FOIA including CITA spices policy.
Speaker 1: Now on the slide 8, for a bit more detail on Billboard and other. Billboard and other digital revenues continued to rebound in the fourth quarter and was up 3.6% to 111 million and now accounts for 37.7% of total Billboard and other revenues.
Speaker 1: Non-digital billboards and other revenue was down 1.9%. The largest increases were in travel, food and hotels with declines and insurance, media and retail. Next, please turn to slide 9 for a review of our performance in Europe . I commentary his own results that have been adjusted to explode in movements in foreign exchange rates.
Speaker 1: Europe revenue increased 2.1% to $357 million at the high end of our guidance range of $345 million to $360 million. The increase was driven by our new Europe North segment, most notably due to new transit contracts in Denmark, as well as growth in other Nordic countries, UK, and the Netherlands.
Speaker 1: And our new Europe South segment, Revenue was higher in Spain in Italy and Revenue was lower in France and Switzerland with the latter driven by loss of certain contracts.
Speaker 1: Your revenue was also about 4.7% compared to 2019 comparable period. Digital accounted for 41.6% of Europe's total revenue and was up 7.4% driven by new digital inventory as well as the success of our programmatic platform LaunchPath. The largest contributors to growth included Denmark Spain, the UK.
Speaker 1: 2019.
Speaker 1: Moving on to CCIDV. Our year of segment consists of the businesses operated by CCIDV and consolidated subsidiaries.
Speaker 1: Accordingly, the revenue for Europe's segment is the same as the revenue for CTIBV. Europe's segment adjusted EBITDA, the segment profitability metric historically reported in our financial statements.
Speaker 1: does not include an allocation of CCIBD's corporate expenses that are deducted from CCIBD's operating income and adjusted even though. You have been CCIBD revenue decreased 33 million during the fourth quarter of 2021 each year compared to the same period of 2021 to 316 million.
Speaker 1: After adjusting for a 41 million impact from movements in foreign exchange rates, Europe and CCIBD revenue increased 7 million. CCIBD operating income was 27 million at a fourth quarter of 2022 compared to 56 million in the same period of 2021. Now, I'm loading this light in another view of capital expenditures.
Speaker 1: CAPEX totaled $60 million in the fourth quarter, a decrease of $5 million compared to the prior year. America's was up $7 million as we ramped up our spending, particularly on digital slaves. However, in Europe , CAPEX would down $13 million, do in large part to the timing of new contracts and movements in foreign exchange.
Speaker 1: In addition to our capital expenditures, I also want to highlight that during the quarter, we did continue to close a few more asset acquisitions in the U.S. totaling 10 million.
Speaker 1: Given our renewed focus on liquidity and the current macro uncertainty, we are being more selective in our acquisition. Now on the slide 11. During the fourth quarter, cash and cash equivalence decline 41 million.
Speaker 1: The decline was in part due to the adjusted EBITDA, being more than offset by cash infestation, cappets and asset acquisitions, as well as changes in working capital as a result of an increase in accounts receivable.
Speaker 1: Our liquidity was $501 million as of December 31, 2022, down $41 million compared to liquidity at the end of the third quarter, primarily due to reduction in cash.
Speaker 1: Our debt was 5.6 billion as of December 31, 2022, basically flat with September 30. Cash paid for interest on debt was $124 million during the fourth quarter. A slight increase compared to the same period in the prior year, primarily due to higher floating rates on a term-lonal B facility.
Speaker 1: Our weighted average cost of debt was 7.1%.
Speaker 1: an increase compared to the way the average cost of debt of September 30th of 2022 due to increases in liable rates. As of December 31st, 2022, our first lead-movered ratio was 5.2 times, but slightly as compared to September 30th of 2022.
Speaker 1: The credit agreement coming in threshold is 7.1 times. With the number of slide 12 and our guidance for the first quarter and the full year of
Speaker 1: At this point in time, we believe our consolidated revenue will be between 540 and 565 million in Q1 of 2023 excluding living and foreign exchange rates. Based on month in, January exchange rates foreign currency could result in a 3% headwind to year over year reported consolidated revenue growth in the first quarter.
Speaker 1: Overall, for the year, we expect revenue to be between $2.575 and $2.7 billion with adjusted EBITDA between $540 and $600 million.
Speaker 1: For all for the year, we expect revenue to be between 2.575 and 2.7 billion with adjusted EBITDA between 540 and 600 million, both excluding payments and foreign exchange rates.
Speaker 1: The drivers of revenue guidance relative to adjusted EBITDA guidance are related to MIX, the effects of one-time items, and the renegotiations of a large-ing system cyclist contract. AFFO guidance is $7,000 to $125 million, excluding movement-impran-exchange rates, now in fiscal year 2022 to primarily to increase interest.
Speaker 1: FES. Capital expenditures are expected to be in the range of $108.5 to $205 million, but the continued focus on investing in our digital footprint in the U.S. Additionally, our cash interest payment obligations for 2023 are expected to be approximately $413 million, and increased over the prior year as a result of higher floating work.
Speaker 1: of interest on our Term 1B facility. The Scottings assumes that we do not refinance or incur additional debt. As you can see in our guidance for the full year.
Speaker 1: on our Term 1B facility. Disguiding the sins that we do not refinance or incur additional debt. As you can see in our guidance for the full year, we expect our revenue to continue to grow.
Speaker 3: However, we will continue to monitor this closely, but have proven our ability to pivot, should be need arise, 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 . We're off to a good start and believe 2023 will be a positive year for the business, despite some uncertainties regarding the macro environment. Supported by a great team and assets, we remain centered on executing against our strategic priorities, including accelerating our visual transformation.
Speaker 3: improving customer centricity and driving executional exports. We believe these efforts are enabling us to elevate the experience and results we deliver to our clients and broaden the pool of advertisers we can pursue. At the same time, we remain committed to addressing our capital structure, divesting our lower margin and lower priority European businesses and taking the necessary steps to support our cash generation of our core business and ultimately reduce our debt.
Speaker 3: And now let me turn the call over to the operator for the Q&A session, and Justin Tacheron will be joining us on the call. Thank you. If you would like to ask a question, please press star followed by one on your telecom keypad. If you would like to withdraw your question, please press star followed by two.
Speaker 3: The moment we're preparing to ask a question, please ensure your device is unmuted locally. Our first question today comes from Ben Swindle and from Morgan Stanley . Your line is open. Good morning. Scott maybe a one for you to start us off here. Can you talk a little bit about how you're thinking about the shape of the year? Where he mentioned the first quarter.
Speaker 3: particularly in the U.S. faces some category specific headwinds, but talk about your visibility into Q2 and beyond, and it sounds like you've spent the year to improve from a growth perspective as they move through the year.
Speaker 3: Then maybe as we now have your airport segment, which reported in a pretty massive growth last year of the support authority contributing. Can you talk a little bit about the outlook for that business as we look in the 23 and 24, what kind of expectations should we have and are there other business out there you may be bidding for?
that might be material. Anything you could share with us on the outlook for airports, I think would be helpful too. Thanks Ben. So for the shape of the year, you know, it is...
It is a sort of Q4 and Q1 have been a little bit of a pause in the momentum that we have seen in the business over the last five or six quarters.
And I think it's attributable to a couple of things. It's pretty narrow and it's pretty accounts specific.
And so particularly as I look at Q1, it's the emerging tech companies and the crypto companies. We never really had that much exposure to sports betting, but that was also one. There were just a few categories that were kind of a femoral and Q1 of last year.
that have well-approved a femoral. We didn't know they were femorable in Q1. And that's creating a little bit of slowness and the last year beginning of this year.
But that's offset by what I referred to in the prepared comments that we had our best step up front ever and our visibility into the rest of the year is strong. And so what we believe is happening is that you had a bunch of companies make announcements about layoffs and things like that.
was where it was a year ago, but the lay down for 2023 is strong and the dialogues and plans people have are strong. I guess the other thing I'd call out is the film really schedule wasn't stellar sort of late last year or early this year and that's obviously an important category for us particularly a couple of our bigger markets.
So, you know, all of those things combined make us think that what we're seeing in terms of a little bit of softness here at the beginning of the year is not going to be how the year as a whole builds. And we guided accordingly on that. So I think our guidance truly represents the best information that we have at this moment. You know, if you're a question on the airport segment, couple of things I call out.
You know, I think we've kind of mentioned this and we certainly mentioned that when we were doing our investor day in September , but we are selling airports differently than we might have sold airports five years ago. We've gotten more creative in terms of looking for kind of sponsorship, type, you know, I think of things like naming rights kind of kind of things.
That business has gotten a lot more digital and it's gotten, you know, coming out of COVID, it's had, you know, a very strong tailwind as travel has taken off. I mean, travel has been one of our hot verticals for the last few quarters and certainly we've seen that play through in airports. But when I look at airports, you know, we don't really get into talking about...
contracts because there's not, you know, kind of, kind of none of them with the possible exception of New York would count as material. And there's kind of relatively regular ins and outs. There's nothing I'd call out in terms of our renewal schedules the next year that's going to be meaningful. But I would note that, you know, we did just go live in Newark Terminal A.
America sales force into the airports. So we have cross-selling between the America sales force and the airport sales force. And that's gotten pretty meaningful and that's something that five years ago was almost negligible. So I think all of those things give us some room to run in terms of further growing that our airports business.
Got it. Thanks so much. Thanks, Ben. We now turn to Stephen. Hey, hold from Volkswagen. Your line is open. Thank you. Maybe first just to go deeper into some of Ben's questions. So you talked about there being some of these pocket the softness in the US. I think you said that you had fewer headwinds and an easier combat in Europe .
So maybe how do we just think about within the growth guidance, whether it's for Q1 or the full year, how to think about America's versus Europe ? Could we see Europe outgrowing America's, which is usually not the case on an organic basis? So we'd love to get some commentary there. And then, you know, Scott and Brian , you started giving the ASFO metric and it would certainly seem like, you know, future potential for a re-structure could create a lot of value for the company. I think debt is still the big obstacle.
Brian , if I may be read into some of your comments, it sounds like you might still have some ideas of things you can do this year beyond the Swiss Investiture to manage the balance sheet. So I'm just curious what options you think you've got this year to start to shape the balance sheet to a little lower level of leverage. Thank you. Thanks, Dean. Good morning. So let me take the first part and I'll let Brian take the second part.
You know, recall that it seems like ancient history, but Q1 last year is when the infamous Omicron was with us. And that hit Europe considerably harder than it hit the US.
And so you have a, it's just a math exercise, a little bit going on, and particularly there were countries within Europe that were differentially hit with Omicron. And so when you think about Q1, you should probably expect that Europe will be outgrowing the US. Again, net of currency. I mean, currency always confounds.
exactly how those numbers are going to go. But that's probably not an unreasonable way to think about it. And that's actually true a little bit as you think about the full year because obviously Q1 is part of the full year. And there are geographies in Europe that still have not.
fully recovered from COVID. Parts of Europe have recovered and are way, way ahead of 2019, not all parts are. And so, you know, there's probably a little bit of a mix toward Europe in that revenue mix. It's not massive. But, you know, we...
We were very specific in giving consolidated guidance just because there are so many moving pieces across the portfolio, but we did build it, obviously, it kind of bottoms up, but it becomes very unwieldy to try to guide in lots of little sub-segments.
So that's why we did it as a whole. But hopefully that gives you a flavor for the mix. And I'll have it to Brian to ask, I'd suggest the second question. Sure. Thanks, Steve. I think our path to read optionality is both a deliberating story and then obviously getting the size of the portfolio readable assets to the right level. And so the strategic review going on in Europe is obviously an important element to that.
And while the ultimate resolution, if it's through asset sales, is probably not directly delivers, and at least not meaningfully so, it does carry with it, reduce capital, expense, simplification of the business, lowering of corporate costs. And so I do think visibility into the ultimate outcome there will be an important consideration as we look to other options to deliver.
And other options may be needed. And all options are on the table, but I think it'd be premature right now to really kind of dive into those. I just, you know, the company has some run-way. We've got the process going on and we're going to be open-minded about the things that we can and need to do to be left with a balance sheet. But it's really that and getting the asset based in the right place, being the two obstacles so to speak, to putting ourselves in a position.
where we could eventually read this business.
We now turn to launch the Sansa from Cohen. Your line is up. Hi, good morning. This is Jonathan on for ten. And for those questions, we are on the next segment reporting. Just curious to know what what led to the new breakout.
It's a determination management makes based on really how we manage those businesses and how we allocate resources. So the three elements were breaking out airports and I think the size of that business also contributed to decision to break that out. The second piece was the division between Europe and North and Europe South. I think.
The numbers kind of historically speak to the differences in those business and the logical management and differential allocation of resources. And then the third piece is taking Singapore out of the Europe category, putting it in the other that decision probably speaks for itself. But it really is a management determination based on those criteria. Okay.
Can we expect much renovations in both the Americans that you have going forward? I know from this light in the presentation, it appears that Europe has largely tapered off and while there's still some in America, I kind of just want to get a better feel for that trajectory in 23. Well, you're right in that. They've largely tapered off in Europe and I think that same kind of tapering off should naturally occur in the Americas. The thing I point out is obviously this is something that we want to do and we'll vigorously pursue opportunities where we feel it's appropriate and there's still some out there in America that we'll continue to pursue. But they will largely continue to diminish over time.
Okay. In my last one, just given the higher rate environment, does that necessarily trigger any change to strategic priorities given that the eventual need for refinance at higher rates? Does that change the story at all or no?
Well, it's a significant consideration. Our interest expense has gone up, but maybe even more importantly, the level at which you could assume refinancing to occur is probably at a higher point than it would have been say a year ago. So it's definitely consideration in the things we look at. It is a headwind to free cash flow generation.
That all being said, we do have a runway and there are a lot of moving parts in the business right now. I wouldn't say that it necessarily has led to change in our strategic thinking, but it certainly is an important consideration and that we are certainly thinking about.
Yeah, I mean, I think Jonathan, the only thing I'd add on that one is a year ago, who would have forecast rates would be where they are right now. And we are still a couple years from where we're going to need to engage. And so this is a slowest smoothest fast sort of scenario to borrow from my special operations friends. business careers
We will be watching the market very carefully on this and we'll do the appropriate action as our window approaches more closely.
Thank you. Thanks, Jonathan. Our next question comes from Abby Steiner from JP Morgan.
On the company's full-year guidance, it looks like at least at the midpoint margins, slightly lower year over year. I just want to make sure I understand the puts and takes from 22. Obviously some rent abatements being a part of the issue or less of them. I assume airports growth. I'm curious if I'm missing anything else. And I've got a couple more. Thank you. I think we talk about the abatements following the way as you pointed out. The mix of airports grows.
And I think the other thing we've mentioned is we have a major contract in the U.S. that's gone through a renegotiation and that's been a little bit of a headwind. So it's really, it's those three things that are headwinds on ebbed on margins. So I think you're thinking about the right way, Avi. Okay, that's a two-second. Then one of your peers talked about, I guess, the programmatic talent channel being a little bit.
you'll see in our proxy we actually delivered on our plans despite that. So point the point being the second thing you said which is it's not that big a part of the mix. I actually would tell you is the programmatic market right now is pretty solid. It's not...
Again, it's hard to compare a Q1 to a Q4 ever, but it's certainly showing some decent growth right now. So, yeah, I don't think that we're counting on it to be a massive part of the guide that we gave, but...
There's no indication that it's in a bad place, I guess, is how I characterize it. Great. And last one for me, and thank you for the time. I used to approach each from Switzerland's sale, recognizing you can read the set that business. I'm just curious if we should ultimately be thinking about it as targeting the CCIPV notes and future asset sales out of that.
Anthony, and thank you. Yeah, I think we've talked about how we're planning to reinvest those proceeds in the business, which is permitted under the various bond and interest, including the CIFP. And Ditchard, that will free cash flow from the European operations that would have otherwise been used to fund those investments. I think right now, given the current environment, will probably bolster liquidity with those.
with that cash, it isn't otherwise used once the sale of Switzerland occurs and it is completed. But that could change over time and they'll be available to use throughout Europe for additional reinvestment and other things including debt repurchases of the CCIDV notes. But it's probably premature, really, to go there yet. I think right now it's liquidity optimization once the deal actually closes. Thank you very much.
who will, you know, we're positive on that business.
I don't know Scott about the digital, non-digital color going forward if there's anything to say to that. Yeah, I mean just on the dynamic, I mean you've seen steady and increasing rapidity of our business becoming more digital over time.
You see the penetration, I think the reporting will be illuminating to some folks on how penetrated some parts of the portfolio are of digital airports in northern Europe being particular standouts in that category. So digital is a growth.
part of the story, but we've been pleased by how our non-digital has held up. Much of the 2022 performance in the non-digital was kind of category driven by some of the some of the mixtures we had in our advertiser base. And you know that that should...
sort of wash out as we get into 2023. So I think our consolidated guides and our consolidated guides are just trying to give you some color on some of the underlying dynamics. Thank you. And then in Europe , is there more room to rebound in?
think about rebound, but I think in general, yes, would be the answer to that question. And, you know, there are some contract puts and takes. You know, that's always a dynamic within Europe , and I think we call the couple of them out in the comments in terms of where things are.
But yeah, in general Southern Europe has recovered more slowly from COVID and that should have an opportunity in those markets this year. Thank you. Thanks for your time. As a reminder to ask any further questions, please first stop on your telephone keypad now.
now sounds like Jim Goss from Barrington Research. The line is open. Thank you. Regarding the split of North and South for Europe , is it because of geographic operating similarities or does it have any implications as to how you might decide to market the properties issue?
to this evaluation and increase the core of the US.
Yeah, Jim, you know the decision to have this segmentation is really driven.
By accounting considerations and the way we manage the distance for that, that is true. Now, part of that differentiation and management and different differentiation in the allocation of resources can be tied to other things. But largely, and by the way, I think the segment reporting and the difference, particularly in Europe , between the North and the South, is framed from the North suits or since the obvious death of the Jonathan
give some color into the different operating characteristics in those different regions. But it really is one of how we manage the business, who manages the business, what kind of resources we allocate to those businesses that drives the segment reporting. Bye.
characteristics in those different regions. But it really is one of how we manage the business, who manages the business, what kind of resources we allocate to those businesses that drives the the segment reporting, not, you know.
What you're targeting for sale or not. Hopefully that helps. OK, yes. And you just mentioned, go for some other Europe , Europe , as they stand out in terms of digital. You have roughly 42% of revenues both in US and Europe , counter for contributed by a digital. And I wonder, is that pretty consistent by geography and category or...
And how does that drive your expansion opportunity as you're elegant in capital? So digital is very different by geography, by contract, by sort of situation. And we do believe that...
you know, ongoing digitization of this business is an opportunity. You know, we are very penetrated in digital in the UK. You know, airports has become increasingly digital and as you get into, you know, newer airports, they're increasingly digital too.
So, kind of as you refresh contracts in any of those places, you're going to see digital on the expansion. Obviously in the America business, that's where the big regulatory constraint is. And some of the countries in Europe , there are regulatory constraints on being able to be digital. But we're finding over time.
as more and more places have the experience that airports in the U.K. are having that we're able to increase usage of digital. And clients do really like the immediacy of it. They like the flexibility of it. They like the creativity of it. The ability to, you know, day part messages to have a different message in the morning than the afternoon, those sort of things.
So the features of it we think are things that the customers like. So we're going to continue to go in that direction as we can. But it is very different by geography and there's not kind of an easy summary way to give you an answer to what I think you're going for in the question. But it is definitely different by geography.
Thanks, Jeff. Our next question comes from Jason Pazant from City. Your line is open.
I just had a quick question on organic growth both for last year and what sort of organic growth is embedded in your guidance for this year. In particular, I was just interested in how, if at all, inflation, both last year and your expectations this year, sort of influence your ability to take rate and influence the organic growth expectation.
So, thanks Jason. We absolutely saw a strong rate environment and frankly continue to see a good rate environment. Again, where there's softness, it's a little bit of use in credit. Right now, it's not. It's not.
a little bit easier of a conversation. You know, obviously, the...
The transition from COVID environment to the environment we were in in kind of second half 2021, first half 2022 to what I characterize as us, you know, approaching a more quote unquote regular, unregular is a dangerous word, but we're getting into more of a regular trading environment. And so, you know, rate increases will probably be...
more challenging over time as we see that, but because it's not as straightforward as just, you know, inflation is X, so therefore rates going up Y. There's a lot of segmentation of our assets in terms of location.
And it has been a very premium market in terms of advertisers looking for the very, very best locations. And that creates a rate.
So, I guess what I tell you is that we are very focused on rate. We're very focused on yield. Rate being an important part of generating yield. And we expect that we will continue to be able to drive yield.
in 2023. Hopefully that gives you something that I'm not sure if that will be the exact spirit of your question. Yeah, it seemed like you guys had, I mean, the industry, I felt like, had pretty good pricing power, but it sounds like that's going to moderate a bit, but you're still going to be able to generate organic growth, I guess it's going to take away.
for 23. Yeah, and I mean, I at least think of our digital conversions as organic growth too because it's not acquisitions and the paybacks are very attractive. So it's not, the growth doesn't just come from rate, I guess, as the point I make to you.
Understood. Okay, thank you. Thanks, Jay. This concludes our Q&A on our hand back to Scott Wells, CEO for any closing remarks. Great, thank you very much. We appreciate you all joining our call today. We do feel good about the year that lies ahead.
and are optimistic and look forward to updating you as the year develops on the very strategic initiatives and operating initiatives that we touched on. Have a great day. This call has now concluded. Artists patient, you may now disconnect your lines.