Q1 2023 Clear Channel Outdoor Holdings Inc Earnings Call
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Ladies and gentlemen, thank you for standing by welcome.
Clear channel outdoor holdings Inc's.
First quarter earnings conference call.
I'd like to register your questions. During the presentation. Please press star followed by one on your telephone keypad.
I'll now turn the conference I would show host Eileen Mclaughlin Vice.
That's not an 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 Coleman, our CFO , Scott and Brian will provide an overview of the 2023 first quarter operating performance of clear Channel Outdoor Holdings, Inc, and clear channel International BV, We recommend you download the earnings presentation located.
In the financial section and our Investor website and review the presentation. During this call after an introduction and review of our results well open the lines for questions and Dustin Cochrane CEO of clear channel U K and Europe 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 its strategic goal. 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.
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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.
<unk> earnings presentation.
Also please note that the information provided on this call speaks only to management's views as of today may nine 2023 and may no longer be accurate at the time of a replay.
Please turn to slide four in the earnings presentation, and I will now turn the call over to Scott.
Good morning, everyone and thank you for taking the time to join today's call.
Our solid first quarter consolidated results reflect continued strong execution by our team.
Bind with overall healthy demand from advertisers, particularly for our digital assets.
We delivered consolidated revenue of $561 million, excluding movements in foreign exchange rates in line with our guidance and up approximately six 6% as compared to the prior year period.
The trends we saw in the fourth quarter largely continued into the new year with the out of home industry demonstrating resilience.
Advertisers are looking to tap into our growing audiences, while recognizing the benefits stemming from our industry's embrace of digital technology.
I'd like to call out our team for their focus and contributions as we continue to progress in leveraging the scale of our platform and technology strategy to make our solutions more data driven easier to buy and faster to launch.
We believe these efforts combined with the breadth of our footprint have strengthened our ability to drive business, even as parts of our business come under pressure as we engage with a greater and more diverse pool of advertisers.
During the quarter, we saw some weakness in revenue within the U S. Due to a few specific issues impacting certain national accounts.
These included accounts doing layoffs select categories, like crypto and emerging tech and select markets like San Francisco, and Chicago, rather than broad macro events.
Regardless, we are dissatisfied with the results in the U S and believe that we can improve as the year develops.
Part of what gives us this belief is the good progress we've made in building our presence in the CPG arena as well as in the pharma category, where we have room to grow in the Americas segment.
Business services, <unk> and amusements are all categories that remain notably strong as well.
Further in Europe , North we continue to experience healthy demand for our digital assets and our programmatic platform.
Digital revenue accounted for 51% of Europe , North revenue and grew 16% compared to the first quarter of last year, excluding movements in foreign exchange rates.
So we believe we are benefiting from a more stable and attractive business platform as we integrate the right kinds of digital technologies into how we operate and serve our customers.
During the first quarter digital accounted for 38% of our consolidated revenue and rose nine 7% compared to the first quarter of last year, excluding movements in foreign exchange rates.
As we execute our operating strategy. We are also continuing to evaluate paths that we believe will enable us to enhance our balance sheet and maximize the value inherent in our business we.
We recently completed the divestiture of our business in Switzerland, generating $94 million in gross proceeds and we plan to use the net proceeds from this transaction to improve our liquidity position.
Additionally, we continue to review, our low margin <unk> low priority European businesses.
Turning to our outlook as I mentioned, we are not seeing signs of a broad macro related pullback in our industry and advertising demand remains healthy however at the country level growth rates are expected to vary as the year develops.
In our Americas segment dialogues with advertisers remained positive and we are encouraged by the trends, we're seeing which bodes well for the rest of the year.
Thus far the second quarter revenue is looking better than the first quarter in terms of year over year growth and we anticipate the third and fourth quarters will perform better as well.
We also believe airports revenue should rebound strongly from Q1 and performed well for the rest of the year and beyond.
In addition to the rebound in leisure travel business travel continues to recover in a recent study we conducted confirms that frequent flyers are highly engaged with our advertising platforms. We're.
We're providing brands with a very effective and efficient channel to influence these coveted audiences as they travel.
In Europe , we're also continuing to see healthy demand across the majority of our markets with no indication of a slowdown due to macro concerns.
Europe, North which turned in a strong revenue performance in Q1, reflecting continued strength in certain markets as well as a post COVID-19 rebound in our transit business is expected to have tougher comps and therefore, a slower growth rate in Q2 and.
In Europe , South, which also delivered a solid top line revenue performance in Q1 is expected to have tougher comps due in large part to the sale of Switzerland, as well as the business trends normalizing and the unrest in France.
Taken together despite the slow start of the year in the U S. Overall, we're encouraged by what we're seeing at this point, particularly given the macro uncertainties are.
Our full year guidance remains within the range. We provided in February with the exception of adjusting for the sale of Switzerland, and reducing capital expenditures.
As we execute our plan, we are keeping a close eye on trends across our markets and remain optimistic about our business.
Ryan will provide our guidance for both the second 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.
As Scott mentioned, our first quarter results were in line with our guidance and we remain optimistic regarding our outlook for the balance of the year.
As a reminder, during our discussion of GAAP results I'll also talk about our results excluding movements in foreign exchange rates. Our non-GAAP measure. We believe this provides greater comparability when evaluating our performance.
<unk> operating expenses and SG&A expenses include restructuring and other costs that are excluded from adjusted EBITDA and segment adjusted EBITDA.
And the amounts I referred to are for the first quarter of 2023 and the percent changes our first quarter 2023 compared to first quarter of 2022, unless otherwise noted.
Additionally, the sale of our Switzerland business was concluded on March 31, 2023 and is included in our first quarter operating results, but will not be included in our results going forward.
Lastly, as we mentioned during our fourth quarter earnings call. We expanded this segments in our reported results. We now have four reportable segments.
Americas has been separated into America and airports Europe is now Europe , North and Europe , South with Singapore included in other along with Latin America.
This is the first quarter, we will provide the quarterly results with the new segment reporting we have added a new feature to our investor website under the financials tab called the interactive Analyst Center.
You can find our reported results for fiscal years 2019 through 2022, and 2022 quarterly results based on our new reporting segments on our side as well as in our filings with the SEC.
Now.
Onto the first quarter reported results.
Consolidated revenue for the quarter was 545 million a three 8% increase excluding movements in foreign exchange rates consolidated revenue was up six 6% to $561 million at the high end of our consolidated revenue guidance of $540 million to $565 million.
Net loss was $35 million an improvement over the prior year's net loss of $90 million adjusted.
Adjusted EBITDA was $52 million down 26% excluding movements in foreign exchange rates adjusted EBITDA was $51 million down 22, 3%.
The decline reflects the impact of increases in fixed site lease expense due to various factors, including new contracts lower abatements and the renegotiation of a large existing site lease contract as well as revenue mix.
<unk> was negative $57 million in the first quarter and negative $58 million, excluding movements in foreign exchange rates.
On to slide six for our Americas segment first quarter results.
America revenue was $236 million down one 3%, reflecting a pullback in media. In addition to tell Cowen banking. However.
Rob mentioned, we continue to broaden our customer base as we leverage our investments in technology and these efforts partially offset the overall impact of the aforementioned category specific reductions on our overall America performance during the quarter.
Digital revenue, which accounted for 33, 1% of America revenue was up three 6% to $78 million. However, this increase was more than offset by declines in printed formats.
National sales, which accounted for 33, 1% of America revenue.
Down eight 7%, primarily due to tough comps.
Local sales accounted for 66, 9% of America revenue and continued to deliver growth up two 7%.
Direct operating and SG&A expenses were up 11, 1% to $155 million the.
The increase is primarily due to a 13, 3% increase in site lease expense to $83 million drill.
Driven by new and amended contracts and lower rent abatements.
Higher credit loss expense was driven by specific reserves for certain customers and in our view is not an indication of a broader weakness in.
In addition, higher compensation costs were driven by increased head count.
Segment, adjusted EBITDA was $81 million down 19% with segment adjusted EBITDA margin of 34, 5% down from Q1 2022.
Adjusting for the renegotiation of a large existing site lease contract we called out on our previous earnings call margins will be close to pre COVID-19 levels.
Please turn to slide seven for a review of the first quarter results for airports.
Airports revenue was $54 million down three 7% the decline in revenue was driven primarily by the timing of specific campaign spending.
Digital revenue, which accounted for 55% of airport revenue was down three 3% to $30 million.
National sales, which accounted for 61% of airport revenue were up four 9% local sales accounted for 39, 9% of airports revenue and were down 14, 4%.
Direct operating and SG&A expenses were up three 4% to $48 million. The increase was primarily due to a four 7% increase in site lease expense to $36 million due in part to a normalization of airport payment terms.
Segment, adjusted EBITDA was $6 million down 36, 9% the segment adjusted EBITA margin of 11, 6%.
Next please turn to slide eight for a review of our performance in Europe , North My commentary on Europe , North and Europe , South is on results that have been adjusted to exclude movements in foreign exchange rates.
Europe , North revenue increased 14, 9% to $140 million.
Revenue was up across all products and in all countries, most notably, Belgium, Sweden, and the United Kingdom, driven by increased demand and new contracts digital accounted for 51, 1% of Europe , North total revenue and was up 16, 1% to $71 6 million driven by growth in most countries with a large.
Just increase in the U K.
Europe , North direct operating and SG&A expenses were up 15% to $133 million.
Site lease expense was up 13, 6% to $62 million, mainly driven by higher revenue and new contracts. In addition, our mix of other operating expenses increased in the quarter due in part to higher prices and increased sales activity.
Europe North segment, adjusted EBITDA was up 11, 1% to $8 million and the segment adjusted EBITA margin was five 5% in line with the prior year.
Now on to slide nine for our performance in Europe South.
Europe, South segment revenue increased 25% to $112 million. As this segment has continued to recover from the adverse effects of COVID-19, we have seen increases in revenue driven by increased demand across all of our products, most notably street furniture and in all of the countries in which we operate did.
Digital accounted for 23% of Europe , South total revenue and was up 35, 3% to $23 million driven by increases in all countries with the largest growth in Spain.
Europe , South direct operating and SG&A expenses were up 12, 8% to $125 million.
<unk> expense was up 13, 2% to 58 million, mainly driven by new contracts and higher revenue. In addition to other operating costs.
Europe South segment, adjusted EBITDA was a negative $13 million an improvement over the prior year's negative $22 million.
Moving on the CCI BV on slide 10.
Clear channel International BV referred to CCI BV is an indirect wholly owned subsidiary of the company and the issuer of our six and five eight senior secured notes due 2025.
It includes the operations of our Europe , North and Europe , South segments, as well as Singapore, which following the changes to our reporting segments in the fourth quarter of 2022 is included in other.
<unk> revenue increased 11, 7% to $242 million from $217 million, excluding movements in FX <unk> revenue increased 18, 8% driven by increased demand and to a lesser extent new contracts.
Singapore represented less than 3% of <unk> revenue for the three months ended March 31 2023.
<unk> operating income was $66 million compared to operating loss of $48 million in the same period of 2022 with the change primarily driven by $96 million gain on the sale of our business in Switzerland.
Yes.
Now moving to slide 11, and a review of capital expenditures.
Capex totaled $38 million in the first quarter, an increase of $3 million over the prior year, we increased spending in America airports in Europe , north largely related to digital investments.
Opex spend in Europe , South declined due to decreased investment in France, and Spain, largely related to street furniture assets.
Now on to slide 12.
During the first quarter cash and cash equivalents increased $53 million. The improvement was in part due to the cash proceeds received from the sale of Switzerland, adjusted EBITDA contribution and lower working capital used partially offset by higher cash interest and capital investments.
Our liquidity was $545 million as of March 31, 2023 up $44 million compared to liquidity at the end of the fourth quarter due to the increase in cash partially offset by the seasonality in our borrowing base.
Our debt was $5 6 billion as of March 31, 2023, basically flat with December 31.
Cash paid for interest on the debt was $72 million during the first quarter, an increase compared to the same period in the prior year, primarily due to higher interest rates on our term loan facility.
Our weighted average cost of debt was seven 2% slight increase compared to the weighted average cost of debt as of December 31, 2022, due to the increase in floating rates.
As of March 31, 2023 are first lien leverage ratio was five five times.
Slight increase as compared to December 31, 2022.
Our credit agreement Covenant threshold to seven one times.
Moving on to slide 13, and our guidance for the second quarter and the full year 2023.
At this point in time, we believe our consolidated revenue will be between 635 and $660 million in Q2 of 2023, excluding movements in foreign exchange rates.
We have updated our full year guidance to adjust for the sale of Switzerland.
Excluding that change our guidance remains within the range. We provided in February with the exception of a lower projection for Capex spend.
We expect revenue to be between $2 5 billion and $2 65 billion with adjusted EBITDA between $525 million and $585 million, both excluding movements in foreign exchange rates.
<unk> guidance of <unk> $65 million to $115 million, excluding movements in foreign exchange rates down from fiscal year 2022, due primarily to increased interest expense.
Capital expenditures are expected to be in the range of 165 and $185 million, but the continued focus on investing in our digital footprint in the U S. Additionally.
Additionally, our cash interest payment obligations for 2023 are expected to be approximately $414 million an increase over the prior year as a result of higher floating rate interest on our term loan b facility.
This guidance assumes that we do not refinanced or incur additional debt.
And now let me turn the call back over to Scott for his closing remarks.
Thanks, Brian .
Looking ahead, we continue to expect a positive year for our business and we remain well on track with regard to the annual guidance as Brian noted.
On the operating side, we remain focused on improving execution investing in our digital transformation and continuously improving the customer experience at.
At the same time, we remain committed to enhancing our balance sheet, including taking steps to support the cash generation of our business and ultimately reduce our debt.
Before going to Q&A I want to highlight our nuclear channel outdoor website on slide 14.
This site is designed to be a strong lead funnel for our sales teams.
As well the enhanced user experience makes it easy for visitors to find the valuable information they are looking for from Coa.
The slide highlights our new branding visually shows the power of our medium and tells users how they can get more by working with us versus other media companies I encourage you to log on and experience the site.
And now let me turn the call over to the operator for the Q&A session and Justin Cochran will join us on the call.
Thank you if you would like to ask a question. Please press star followed by one on your telephone.
If you would like to withdraw your question. Please press star followed by two one.
One for clients asking a question. Please ensure your devices and muted locally.
The first question today comes from Richard <unk> from Jpmorgan. Your line is open.
Thank you I just wanted to talk a little bit about the revenue guidance that you gave for the segments a little bit.
Just a little bit more color on the Americas business and the airport.
Do you expect those categories to be in.
And the syndicate manner for the full year.
Do you want to take this one Brian anyone.
Yes, I can.
I can take a stab at it Scott and you can you can come over the top.
We don't we don't provide segment guidance going forward, but I do think if you look at the Q1 performance for both of the businesses in the Americas, So America and.
In airports I think some of the headwinds that were experienced in each of those segments are likely to dissipate going forward and I would expect growth in both the Americas business.
In the airports business when we talk about airports.
Some of the headwinds impacting airports as the timing of campaigns, we hope that those campaigns will come back over the rest of the year that we're able to fill the pipeline with other things. So I think we do expect improvement.
And the airport segment and I would say the same for the America segment, Scott, It's got some headwinds in the year in the first quarter that we.
We expect to.
To dissipate and we do expect top line improvement.
First quarter is not the strongest quarter for this business is very seasonal and then we've got some quarterly impacts, but I think both of the segments in Americas American airports will continue to improve as the year rolls on.
Yes, I think the thing I'd add Richard is.
We are reiterating our guidance.
So in order to be able to do that the numbers that we put forward certainly had growth.
Pretty much across the board.
And you wouldn't be able to get the EBITDA growth that we're talking about in particular, if the U S wasn't.
It wasn't going to be performing so hopefully that.
Without without getting into the business of trying to guide every individual segment hopefully that gives you a sense of where we're coming from.
Got it and I don't know how much you can comment on this but with Europe , north and so kind of.
Just normalizing and doing better.
The numbers being changed.
Transferred to us at least.
Are you seeing more interest in those businesses and do you think there is a better potential to sell more of the segments either.
Country or do more as a group.
I mean, Richard it's a great question and.
I think I think as you think about Europe as a whole when we announced that we were.
Starting this process, we were still frankly in Covid I mean omicron came after.
We announced it in Covid was very hard on a number of the European markets and so if you think about where we were when we started.
And when we pivoted to doing country level.
We had basically one good quarter Q4 of 'twenty one in our.
Pocket.
And our plan and what has happened subsequent to that.
Is that the business has actually performed quite well and it's been inconsistent country to country, but overall.
Now we have a half dozen quarters.
Under our belt not quite a half dozen yet, but it will be it will be soon and I do think that that will help us when the time comes for us to market.
The.
The part of Europe that we've articulated since the middle of last year, that's going to be higher margin and cash generative and so forth.
So I do think it helps but.
You have to recognize these processes.
We've all witnessed are slow.
And when you're dealing at a country level when you get into an awful lot of minutiae that theres, an awful lot of back and forth on.
<unk>.
You may well have agreed a price a lot earlier in a process than when you actually get to the completion of it so the point the point being.
This is not this is not real time bidding this is it.
Vance negotiation on the things that are actually in market right. Now so hopefully that gives you a little bit of color without me, telling you anything.
More more granular that would get me in trouble.
Thank you.
Our next question comes from Avi Steiner from Jpmorgan. Your line is open.
Thank you good morning, a couple here.
One can we just dig it a little bit more into America, you called out national account weakness rather than broader macro.
Context, a little bit more.
You guys remain confident for the year there. Thank you.
Thanks Avi.
I think I think there's a couple of things going on I mean, we said this in our Q4 call, but maybe maybe not everybody heard us, but the year started pretty rough January and February were pretty pretty rough years, particularly in the national account space, particularly in crypto and emerging tech.
And.
What we have seen has been a steady progression of each month getting better you heard us talk about in the in the Q4 call about how we had had the best upfront since we started recording it.
And that is how the upfront.
Wrapped up.
And that gives us that's what's driving a lot of the confidence that we have along with the dialogue that we're having I mean outdoor does get plan a fair bit in advance and so we've got a pretty good idea what brands are planning to get after in the in the second part of the year and so.
You take all of those different data points together and you take what's on our book right now.
What gives us the confidence to say, what we're saying about how things are how things are developing so there's a lot of data points into it.
Terms of in terms of what what actually happened I think we tried to lay this out very granularly in the script, but we have a lot of exposure to San Francisco and San Francisco was a very tough AD market in Q1.
I think that.
If you if you talk to any of the other players associated with it that that would resonate.
And that's our second biggest market. So that that has that has a real impact on us and thats, both at the national and the local level.
International the emerging Tech again overlap with the San Francisco thing was a big deal relative particularly to the year prior where that had been a very vibrant category in Q1 of the in Q1 of the prior year.
So I think those are the those are the factors that contribute to what happened in Q1.
And as we look forward, we do have a number of data points like everybody else, we're aware of the economy being a little bit murky and it being a little unclear where the macro is headed but I am encouraged as we've had the bumps.
Over time with.
With various.
Financial services institutions and whatnot in the headlines we.
We have continued to have good dialogue with with advertisers and we continue to be booking business. So.
We feel good about how the year is going to develop.
Terrific, Okay. It looks like.
Free cash flow.
Implied usage may be a little bit better here, the capex reduction a little bit more.
The EBITDA.
<unk> is that all related to Switzerland is there something else within that.
Oh, yes, I'm not sure I followed the question I know it was cash flow and then it kind of ended with the change it was 21.
Millions of Capex $20 million of Capex reduction.
<unk> million dollars of kind of midpoint EBITDA something about it right. Maybe my math is wrong I just want to make sure I'm I mean are we.
Talking about adjusted guidance are still somewhat tracking I think thats what is the full year for full year guidance.
Yes, okay. So.
Well I think I think it does reflect Switzerland.
With respect to the Capex number it also reflects reduced reduced anticipated spend in capex.
Okay, two very quick ones here site lease expense in the first quarter.
At least in America.
The right run rate for the year and I apologize if you already said that.
I think.
I think our.
I think our margins EBITDA margins or adjusted for onetime items.
Are pretty similar to what.
What we had in 2019, I think that would be a decent run rate.
Again, recognizing that there is a lot of seasonality in the business Q1 is the softest quarter for us every year. So it's going to have the lowest margins because as you flow more dollars through.
You get that operating leverage.
Perfect. Thank.
Thank you and then very very last one from me Youre now the cash in the door from Switzerland, any changes to kind of your prior answers and how you think about liquidity I. Appreciate the time. Thank you.
No changes, we'll hold that cash on the balance sheet to help improve liquidity and as you know.
We will need to reinvest in the business pursuant to our debt documents and that process continues.
No changes.
Thank you everyone.
Thanks Ravi.
Our next.
Comes from Steven Cahall from Wells Fargo. Your line is open.
Good morning, Dan honestly on for Steve.
Maybe just one for Scott or actually for Brian The digital conversion has been additive to the top line in America, but how should we be thinking about the margin impact its growing mix shift and how is your outlook for operating leverage in the business changed at all.
We both can probably answer that one.
Look I think I think.
Digital is.
We do expect it to be margin accretive will continue to invest in it.
Aye.
Okay.
Kind of lost my train of thought on what the second part of the question. One I think as you as you think over time.
Theres a lot that goes into the margin part of the question because the nature of do you own the ground under the sign versus do you have a fixed lease versus do you have a variable lease.
And all of those things all of those things come into play but over time.
We do think digital should be a tailwind to margins.
But we.
<unk>.
That is going to the impact of that tailwind to the question. We were answering with abbvie is going to be a little different.
Q4, where we are at our heaviest quarter versus Q1, where we are in our lightest quarter. So.
But when you look at it over time, it should be a tailwind, but probably not.
Transformational I guess is how I would answer that.
Great that was all for us thank you.
Thanks, Dan Our next question. Our next question comes from Commerce Bank from Morgan Stanley .
One is that.
Alright.
Thanks, Good morning could you discuss the geographic mix large market versus small market and how that's driving growth and maybe the visibility so far into the second quarter.
I'm going to take from that that you are interested principally in the U. S is that is that a true statement or should I be trying to give you a global answer.
Interest in both but.
U S.
Okay.
So we are we are predominantly a top 20 market.
Company, we probably get 80% of our revenue from the top 20 <unk> in the in the U S and as you look internationally most of our countries are going to be capital city oriented.
Not only certainly when you get to bigger countries like France.
France would be a little more like the U S where you would have some concentration in the biggest cities, but when you have a presence in.
A lot more cities, but I'm going to focus on the U S. Because I think thats, where the most useful way to talk about it is when you think about the out of home market in the U S. There are.
Yeah.
Kind of the top two cities, which are Los Angeles, and New York and we have.
A very very strong presence in Los Angeles, and we have a pretty strong presence in New York, principally on times square and in the airports. So we don't have a lot of street level in New York.
But those two markets are the ones that are most impacted by by National advertisers. The next 18 of the top 20 <unk>.
Are going to be a little bit more idiosyncratic of what an advertiser is trying to do as to whether they come in and this is one of the things that is quite different about out of home versus TV is that you.
You don't have people that by truly nationally where they're buying 200 DMA is in running their their campaign everywhere.
Without a home it's a lot more they're trying to be targeted around which markets, they're going to go into and depending on what the product is in the campaign. It varies and so in Q1, where national was soft we're impacted by that more than.
Say Lamar, which is more focused on small markets and more on LOE.
There are local excuse me local local sales.
And were kind of impacted similarly.
As out front, and maybe maybe even a little bit harder than out front, because we don't have as good a footprint in New York.
Potentially so that's kind of how it how it plays out.
But this is a business that you you need to be developing those national accounts, but you also need to be developing regional and local accounts you can't you can't just kind of rely on one one part of the mix to drive the business.
So hopefully that gives you some color.
Got it that's helpful.
One other follow up so you mentioned developing to CPG and pharma categories.
Curious if you could go a little more into that approach and the value offering and why one of these advertisers would choose clear channel Oprah and other out of home operator. Thanks.
So.
When you think about advertising with out of home I think the first thing you want to think about is why somebody would choose out of home over other media as opposed to the driver of selecting one averaged one one media owner versus another.
Within out of home is going to be more driven by do they have assets in a place that a person wants to advertise so like if you want to advertise in the New York airports Youre going to need to work with clear channel. If you want to advertise in the New York subway Youre going to have to work without front. That's just that's how that's how the business works and that's the most.
Mark differentiator when we talk about building.
Those categories, though what we're what we're getting at is we are working on bringing the insights from the data that those categories need.
In order to be confident that their marketing is working and so in CPG that might be looking at sales in particular.
Retail channels it might be looking at.
Case case sales from IRI and comparing that to the places that they ran campaigns with pharmaceuticals that would be looking at script generation.
And so this is the this is the cutting edge of where out of home is going in terms of being able to provide the same insight and confidence in marketing spend.
That has made digital so successful over over the last decade. So that's what that's what we're getting at and it's less it's less that we're necessarily trying to take out other out of home players. It's more that we're trying to pull money in from the digital channels and the.
The TV channels I mean, we care about all of it but in the end the amount spent in out of home. If we spend all our time knock in the brains out of the other out of home players.
That would not really be that helpful. Because it's not that big a part of of AD spending.
That makes sense.
Okay got it thank you.
Our next question comes from Aaron Watts with Deutsche Bank. Your line is open.
Hi, everyone. Thanks for having me on Scott any themes, you would call out on pricing and our occupancy across your U S footprint any greater pushback on pricing that you might have experienced over the last couple of years given the macro backdrop.
Thanks, Erin it's interesting.
We've talked about this dynamic a little bit on recent earnings calls, but we continue to be in a very premium market in the sense that the most premium locations, there's more demand for them than there is supply and thats not just us that's across.
All media owners.
I hear this complaint frequently from agencies.
Can't lay their hands on the kind of iconic locations in key cities.
So that's that that dynamic is very strong that's a very strong occupancy dynamic and it is a very strong pricing dynamic as you get down into.
The next year, which would be a lot of your.
Major highway arterial signage.
A nice and healthy marketplace, we're not seeing a lot of a lot of pushback per se.
Less about the pricing and it's more about is the brand investing.
The place, where we're seeing dialogue with people is I am not sure if I'm going to launch my campaign. This month, because im not sure whats happening in the demand profile, but I want to be ready to launch it next month in case.
I feel like things are better than that that was really the state of the art of the conversation in January and February that's part of like January and February were so rough whether you had a lot of people kind of waiting for the go signal and I think as we got into March and particularly April and as we look out towards the rest of the year, we're feeling better that.
People are going to be are going to be placing those so our yields are up.
They were up more on price than on occupancy, but it does vary by the product and it does vary by where you are geographically in the market hopefully that gives you some color.
That's helpful and just one other one if I could just circle back on some of your earlier comments around expenses and margins.
Bridging the first quarter margins to those implied in your full year guide the biggest driver of that is that the layering on of.
Of revenue growth that you expect to see on that.
A bit more elevated expense base or are there other kind of big levers, maybe I'm more on the expense side that would move within that as well.
Yes, I think I think it does reflect.
Top line growth through the remainder of the year.
It also reflects.
As you roll forward through the quarters, some some improvement and expense comparison as the abatements started to trail off that will be less of a headwind.
It was a headwind in Q1.
So I think I think those are probably some of the some of the biggest drivers when we talk about comps as we roll through 'twenty three quarters versus 22 quarters.
And Brian just remind me where there any other larger lease renewals coming up similar to the one that you've called out or that was really a bit of a one off.
Although I would say that's a one off in terms of magnitude. We obviously have lots of leases that come up in our renegotiated if I really view the rest of them as a portfolio not materially impacting the business as they come up for renegotiation now that all being said we still have.
Certain leases that that reflects some covenant relief it wasn't an abatement, but the terms of the lease where based on perhaps things that were impacted by COVID-19 and as that as we get out of Covid and have.
These comparative periods.
That that will that will continue to be.
An expense item that will have to face but to answer your question kind of directly none of that rises to the magnitude of the one one.
Renegotiation, where that we've identified last quarter.
Okay I appreciate the time thanks, guys.
Thanks Darren.
Our next question comes from Jim Goss with Barrington Research. Your line is open.
Alright, thank you.
I was wondering first where the gains in Europe do you think more.
FX more recovery from the Covid era or the.
Underlying growth.
I think I think it is.
Two pronged story I'll hit it and maybe Scott adjustment wants to circle back up I think in southern Europe . It is largely a cogent story and the winning of some contracts but.
In Europe , South that business had not had not reached.
Pre COVID-19 2019 levels.
They are climbing back in approaching that in sub markets at or better. So I think a lot of it is covered.
Recovery story, but I don't want to I don't want to set aside some victories that we've had in those countries, particularly in Spain in terms of new contracts. So I think it's a mix of both northern Europe on the other hand, I think largely add recovered from covered the exception would be some of our change that agreement. So it's kind of a Scandinavian heavy that has been a recut.
Particularly in Q1, but there I think you see growth.
In the northern European markets markets.
Places like Belgium, and Denmark, it's contract wins that helped drive the growth in the U K has continued.
Use of the digital network that we have there I don't know Scott adjusted if you had something more you wanted to add nothing for me just on anything you'd add.
I think that was if I get somebody Brian. This is exactly what it is is a bit of COVID-19 recovery coming back in the south in transit there is underlying growth in other markets, but I think Brian Goldsmith.
Okay.
Sort of.
<unk> basis.
I was interested in the discussion you just had about.
Oh, yes.
Four to six quarters sort of information.
Each of the markets I'm wondering if some of the good results in Europe are causing.
To.
It has slowed down the process of seeking buyers or does it wind up getting more aggressive in price expectations, or maybe you've chosen which which market you either acute versus which markets you might want to sell and maybe that shifted around a little bit.
Yes.
I think.
Jim.
Thing about it is is I think we've been real clear and real consistent that in the long term, we see ourselves as a U S focused business.
But that doesn't mean that.
Yeah.
As we make that transition our number one two and three goal is delivering value to our shareholders and so youre absolutely right as we get more data and it has the businesses perform it will give the counterparties more confidence in buying it will give us more confidence in selling and so.
We'll work our way, we'll work our way through that but the results that we're achieving there.
Tom.
They're not really a surprise to us.
And we feel good about the assets we have we feel good about the the teams running them.
The issue is just one of how do you manage your pass through.
The process that we've that we worked through that.
In an environment, where there is a lot of complexity and so we're working it we remain committed to that vision of being a U S focused business.
But we're not going to be.
Foolish in.
Doing transactions that are unattractive.
Okay, and one final one your assessment of the recession potential from your bottom up bottoms up approach appears a little more encouraging.
Some of the macro observers and is that a fair.
Okay.
I really can't get into the heads of other macro observers I think I would characterize our view as data driven and based on what we can see.
We've been told Jim since March of 'twenty, two that the Apocalypse was nigh and we've continued to.
<unk>.
Run our business and bring in as much revenue and EBITDA as we can and I think thats. The mindset that I would characterize that we have we're looking to drive our business and bring it as much revenue and EBITDA as we can in the end thats, what our shareholders care about not not about.
Our macro <unk>.
We're casting.
In particular, obviously people want us to be forthright on on what we see which is what we're striving to do with the information that we shared today, but I can't really comment on.
Our.
Viewpoint relative to other macro forecasters.
Alright, Thanks, that's helpful.
Our next question comes from Lance Vitanza with TD Cowen Your line is open.
Hi, Thanks, guys.
Quick one on costs, and then I'd like to talk about the domestic M&A environment, but on the cost side just to confirm I know you don't provide quarterly guidance on costs or EBITDA. So how did cost and EBITDA in the first quarter fall relative to your internal expectations.
Well I think I think.
If I take Europe first I think that that there was some outperformance.
That's good.
The recovery in southern Europe versus the Covid quarter.
The reflection of some new contract wins.
Exceeded expectations that we were expecting cover recoveries. So maybe it's the pace of the recovery, but when Youre talking about Europe . You also got to remember Q1 is really small relative to their business and so you've got the law of small numbers of large numbers.
You have to put it in the right context, we talked about Europe , North that business is just really performing strongly and so it's not surprising but it was good to see.
The recovery in the transit business in Scandinavia, We don't have a lot of underground transit, but that's that's where our exposure is in its and its.
It's coming back, but a lot of that growth is really again, new contracts and the use of our digital networks, particularly in the United Kingdom.
I think exceeded expectations in both Europe , Northern Europe Sal.
We're disappointed in the Americas I cant say it was completely unexpected we've we've known that we had some tough comps.
Scott may want to weigh in on that.
On the top line, but I think on the cost side.
The abatements rolling off we knew about we had some credit charges that we don't think are reflective of the larger environment there.
Two or three unique.
Situations that.
We do not expect to recur that was a headwind.
We are we have some contracts that are adjusting for the post COVID-19 environment.
So I think I think I would say that.
The headwinds in Americas in airports.
Not unexpected, but we're disappointed so.
I'll leave it at that Scott I don't know if you have more to say.
Yes, I mean, I think we we talked about it I mean, we tried to be very explicit in the script that.
This was not the expectation that we had that we are dissatisfied with what America in airports did in Q1.
And that we believe we're going to see improvement.
As the year builds.
And when.
When we when we work to put our finger on.
<unk>.
The the.
The bottom line.
Driver.
That revenue aspect of it operating leverage we talk about it all the time because it is a really big thing and so when your.
Most most attractive market doesn't deliver the revenue that youre aiming for.
That's going to be that's going to be a big a big driver and again, we're trying we tried to be very explicit in the.
Discussion of where those those differences work.
Okay. Thanks, I appreciate the follow up there and then on the domestic M&A it looks like you're continuing to make some smallish acquisitions, presumably in the U S. I see you spend another $6 million or so in the first quarter could you talk about the type of assets and maybe even if you could just sort of remind me.
Rough numbers, how much you spent on U S assets in 2022.
And then just sort of talk about where or what type of national versus local or rural versus Big City Airport versus Billboard just anything with respect to the strategy of kind of like what Youre looking for as you continue to tweak the portfolio.
So I'm going to let Brian take the.
Quantity question in terms of spend and whatnot I'm going to give him a minute to pull that pull that up but just in terms of philosophy.
It is entirely.
Roadside when we talk about acquisitions, it's entirely U S roadside that were.
Doing.
And.
That's 2022.
It's entirely U S Road side and we are doing acquisitions. These are not companies that we're buying for the most part. These are a few signs here and there we're not we're not picking up.
A lot of staff for a lot of it is generally if it goes really well you pick up some easements, where you have the ground underneath the sign.
But we're looking for things that are accretive to our footprint and accretive to our RP.
Our P&L overall, Brian you want to take the quantity question sure.
We're going to record Capex.
The acquisitions of about $38 million for the fourth quarter and 2023, we've given guidance on capital expenditures the range $1 65 to 185 four years.
In terms of just pure acquisitions in the quarter, we had about $6 million, mostly in Americas. There was some in northern Europe , and then a reduction.
In southern Europe , and so.
Largely digital and both northern Europe , and Americas, where he spent the spent the capex.
And the acquisition sorry, the acquisitions largely in the U S and largely digital I think on the acquisition side.
That's not included in the Capex guidance that we gave.
That will remain small I think we've got some of the pipeline we're likely to close.
I think in the current business environment, we will we will preserve liquidity and I'll have to be particularly accretive but will continue to.
Pursue it but I think it will largely be in this smallish tuck in category.
Unless the environment changes and then we can become more aggressive.
Great. Thanks, guys.
Thanks Pat.
This concludes our Q&A I'll now hand back to Scott Welch for any final remarks.
Alright, Thank you very much and thank you all for the questions.
Look as we look out at the year, we feel good about where our business is headed we feel good about our ability to bring in revenue and two to drive growth over the course of the year end.
As we as we look forward.
We're hoping that we will be in a position to provide some updates on our European process in the coming quarters and we appreciate everyone's engagement, but the bottom line is that.
We look forward and we feel good about our business have a great day everyone.
Ladies and gentlemen, today's call is now concluded.
Thank you for your participation you may now disconnect your lines.
Okay.
Yeah.