Q3 2024 Clear Channel Outdoor Holdings Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to Clear Channel outdoor holding things. 2024, a third quarter earnings conference call. At this time, I'll participate.
Speaker Change: Our No Listen Only Mode, a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the conference over to your host.
Speaker Change: Vice President and Vester Relations, please go ahead.
Speaker Change: Good morning and thank you for joining our call. On the call today, our Scott Wells, our CEO and David Sailer, our CFO. They will provide an overview of the 2024 third quarter operating performance.
Speaker Change: of Clear Channel outdoor Holings Inc and Clear Channel National BB.
Speaker Change: We recommend you download the 2024-3rd Quarter earnings presentation located in the financial information section of our investor with site and review the presentation during this call.
Speaker Change: After an introduction and our review of our results will open the line for questions and just in ca. CEO of Clear Channel UK and Europe will join Scott and Dave during the Q&A portion of the call.
Speaker Change: 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 goals.
Speaker Change: All-for-relooking 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.
Speaker Change: Please review the statements of risk contained in our earnings press release and our filings with the SEC.
Speaker Change: During today's call, we will also refer to certain measures that do not conform to generally accept that accounting principles. We provide schedules that reconcile these non-gap measures with our reported results on a gap basis, as part of the earnings presentation.
Speaker Change: Also, please note that the information provided on this call speaks only to management's use as of today, October 31, 2024, and may no longer be accurate at the time of a replay.
Speaker Change: Please see side four in the earnings presentation and I will now turn the call over to Scott.
Scott Wells: Good morning everyone and thank you for taking the time to join us today.
Scott Wells: We delivered consolidated revenue of $559 million during the third order, representing an increase of 6.1% or 5.7% excluding movements in foreign exchange rates. In line with our guidance and with growth across all our business segments.
Scott Wells: Our America segment delivered growth across all regions, driven in part by an improvement in national advertising.
Scott Wells: Airport's continues to benefit from strong demand across all channels, and Europe north delivered another robust quarter with gains across the majority of the portfolio.
Scott Wells: We continue to see the benefits from our initiative aimed at leveraging our technology investments and expanded sales teams to maximize our performance in the U.S.
Scott Wells: utilizing our digital expertise and our radar data analytics resources, we're making inroads in the verticals that have traditionally not relied on out of home to reach their target audiences.
Scott Wells: For example,
Scott Wells: are recently announced partnership with Sarkana, further strengthens our radar platform.
Scott Wells: and provide CPG advertisers.
Scott Wells: who under index in our industry.
Scott Wells: with the ability to effectively deliver their message via out of home, while measuring the impact of their campaigns on household purchasing behavior.
Scott Wells: In the Farm of Vertical, we've now reached a point where we can share some really compelling results from past campaigns, which is helping to open doors for us.
Scott Wells: We recently served as a sponsor at Digital Farm and East, one of the largest farm-a-market conferences nationally. This was the first for us and the reception was promising. We are now at the table with numerous farm-a-sutical companies and their agencies discussing potential campaigns in the year ahead.
Scott Wells: With regard to our domestic footprint, we're excited about the recent award of a large 15-year contract for roadside advertising assets controlled by the New York MTA.
Scott Wells: This contract substantially expands our footprint in the New York Tri-State area and elevates our ability to deliver market-wide programs for national and local advertisers in a complementary way.
Scott Wells: So we're making notable progress in pursuing our plan, as we further scale our platform in the U.S. and continue to focus on expanding our revenue sources. Which sets us up well as we look to close out the year and build on our momentum going into 2025.
Scott Wells: In the current quarter, we are continuing to see revenue growth in America.
Scott Wells: Our airports business remains strong, although we're now up against tougher cops, so the rate of growth will naturally moderate. Similar to the airports, Europe North is also up against tough cops and could post roughly flat revenues in the quarter.
Scott Wells: As I noted on our last call, we believe we are turning the corner on cash generation.
Scott Wells: and FFO exceeded discretionary capex in the third quarter and we expect the same in the fourth quarter with continued improvement into 2025. We believe this creates the option to start to organically reduce our debt, a central goal in our focus on enhancing shareholder value.
Scott Wells: On the M&A front, negotiations for the sale of Europe North are continuing, and we remain committed to exiting Europe but a price that reflects the value being delivered by this business.
Scott Wells: Additionally, you may have seen that JC Dakota terminated its agreement to acquire our Spanish business after deciding to withdraw its regulatory filing with the Spanish competition regulator.
Scott Wells: Our understanding is that the regulatory commitments exceeded what J.C. the Co was willing to pursue. The good news is that our Spanish business continued to perform well throughout the process, and we are well positioned to bring it back to market in the relatively near future.
Scott Wells: Lastly, our Latam Sail process is ongoing, and we will provide further updates in due course.
Scott Wells: So overall, we're pleased with the progress we are making on multiple fronts and I'd like to thank our company, wide team, especially in Europe and Latin America for their continued commitment to executing on our strategic roadmap and pursuing our long-term vision.
Speaker Change: With that, let me hand the call over to Dave.
Dave: Thanks, Scott. Please see slides by for an overview of our results.
Dave: As a reminder, Europe's South is included in discontinued operations. Additionally, during our discussion of gap results, I'll also talk about our results, excluding movements in foreign exchange rates, a non-gab measure.
Dave: We believe this provides a greater comparability when evaluating our performance.
Dave: Direct operating expenses and SGNA expenses include restructuring and other costs that are excluded from adjusted EBITDA and segment adjusted EBITDA.
Dave: And the amounts I referred to are for the third quarter of 2024, and the percent changes are third quarter 2024 compared to the third quarter of 2023, unless otherwise noted.
Dave: Now on to the third quarter reporting results.
Speaker Change: As Scott mentioned, consolidated revenue for the quarter was 559 million, a 6.1% increase.
Speaker Change: Excluding movements in Bardi's change rates, consolidate a revenue is up 5.7%.
Speaker Change: Laws from Continuing Operations and Consolidated Net Laws, which includes the laws from discontinued operations, were both 32 million.
Speaker Change: at Justice Evada for the quarter was 143 million, up 2.6% and adjusted Evada excluding movements in far-and-shangestangest rates was up 1.9% from the prior year.
Speaker Change: AFFO was 27 million in the third quarter, a 9.1% increase from the prior year. Including movements in far-hanged generates, AFFO was up 5.5%.
Speaker Change: on the flight 6, the America segment, third quarter results.
Speaker Change: America revenue was 293 million, up 5% with revenue up in all regions driven by increased demand for both digital and printed billboards and the deployment of new digital billboards.
Speaker Change: Digital revenue, which accounted for 36.1% of America revenue, was of 8.4% to 106 million.
Speaker Change: National Sales, which accounted for a 36.3% of America revenue, for up 8.4% on a comparable basis.
Speaker Change: Local Sales accounted for 63,7% of America revenue and were up 3.2% on a comparable basis.
Speaker Change: Direct operating and SGNA expenses were up 4.5% to 165 million due in part to lower property taxes in the prior year related to illegal settlement, as well as higher compensation costs and production expenses related in part to increased revenue.
Speaker Change: segment adjusts to even it was 128 million, up 5.8% with a segment adjusts even a margin of 43.8% a slight improvement from the prior year.
Speaker Change: Please see slide 7 for a review of the third quarter results for airports.
Speaker Change: Airports revenue was 82 million, up 9% with strong advertising demand led by the port authority of New York and New Jersey Airports.
Speaker Change: Digital revenue, which accounted for 51.1% of airports revenue, was up 0.8% to 42 million.
Speaker Change: National Sales, which accounted for 58.6% of airports revenue, were up 8.7% on a comparable basis, and local sales accounted for 41.4% of airports revenue, and were up 9.3% on a comparable basis.
Speaker Change: Direct operating and SG&A expenses were up 8.9% to 65 million. The increase is primarily due to sightly's expense driven in port by higher revenue.
Speaker Change: segment adjusted even though was 17 million up 9% with a segment adjusted even a margin of 20.6% in line with the prior years.
Speaker Change: On to slide eight, for a review of our performance in Europe North. My commentary on Europe North is on results that have been adjusted to exclude movements and foreign exchange rates.
Speaker Change: Europe North revenue increased 8.6% to 162 million with revenue up in most countries due to increased demand, most significantly in Sweden, partially offset by a loss of a transit contract in Norway.
Speaker Change: Digital accounted for 58.1% of your North total revenue and was up 12.4% to 94 million.
Speaker Change: You're of North Direct operating and SDNA expenses were up 12% to 136 million due to higher site lease expense, property taxes and compensation, as well as higher rental costs for additional digital displays.
Speaker Change: Your North segment, Adjusted Evada, was down 4.5% to 27 million, and the segment adjusted Evada Morgan was 16.7% at the client from the prior year.
Speaker Change: Moving on to CCI BB on Sohy9
Speaker Change: Clear Channel International VV, which I will refer to as CCI-VV, is an indirect wholly owned subsidiary of the company and the borrower under the CCI-VV Term Loan facility.
Speaker Change: CCI-BV includes the operations of our Europe, North, and Europe South segments, and prior to September 17, 2024, also included Singapore, which is included in other.
Speaker Change: The financial results of Singapore have historically been in material to the result of CCIBB and revenue and expenses for the Singapore business were further reduced in the first quarter of 2024 due to the loss of a contract.
Speaker Change: on September 17, 2024. CCI-BV sold its equity interest and the Singapore business to another indirect foreign wholly owned subsidiary of the company.
Speaker Change: As the current and former businesses in the Europe South segment are considered discontinued operations, results of these businesses are reported as a separate component of consolidated net income, and the CCIB, the Consolidate Statement of Ancome, for all periods presented, and are excluded from the following results.
Speaker Change: BCI-BV results from continuing operations so the third quarter of 2024 has compared to the same period of 2023 RSVLs.
Speaker Change: CCIB-A revenue increase 8.1% to 166 million from 154 million.
Speaker Change: Excluding the 4 million impact of movement in FX, CCIBV revenue increased 5.4% as higher revenue from our Europe North segment. As I just mentioned, was partially offset by the loss of a contract in Singapore.
Speaker Change: CCIB, the operating income was 5 million, compared to 9 million in the same period of 2023.
Speaker Change: Now I'm moving to slide 10 in our review of Capital Expenditures.
Speaker Change: CapEx told 31 million in the third quarter a decrease of 2 million over the prior year. Now on this slide 11.
Speaker Change: During the third quarter, Cache and Cache equivalents increased by 12 million to 211 million.
Speaker Change: Cashtrate for interest during the third course, decreased 2 million compared to the same period in the prior year.
Speaker Change: Our liquidity was 376 million as a September 30, 2024. Down 29 million compared to liquidity at the end of the second quarter due to the previously announced 34 million decrease in the borrowing limits of the revolving credit facility.
Speaker Change: Our debt was 5.7 billion as a September 30, 2024, in line with the second quarter. Our weighted average cost of debt was 7.4% also in line with the second quarter.
Speaker Change: As of September 30, 2024, our first lean leverage ratio is 5.34 times, a credit agreement covenant threshold is 7.1 times.
Speaker Change: Now on to slide 12, and our guidance for the fourth quarter in the full year of 2024.
Speaker Change: All consolidated guidance and your North guidance excludes movements and foreign exchange rates with the exception of capital expenditures and cash interest payments.
Speaker Change: For the fourth quarter, we believe our consolidated revenue will be between 628 and 653 million, representing a decline of 1% to an increase of 3% over the same period of the prior year.
Speaker Change: We expect America revenue to be between 308 and 318 million, and Air Force revenue is expected to be between 111 and 116 million.
Speaker Change: Europe North revenue is expected to be between 185 and 195 million.
Speaker Change: Moving on to our full-hear guide.
Speaker Change: We expect consolidate revenue to be between 2.222 and 2.247 billion representing a 4% to 6% increase over the prior year.
Speaker Change: America's revenue is expected to be between 1.141 and 1.151 billion. Air Force's revenue is expected to be between 356 and 361 million.
Speaker Change: Your North revenue expected to be between 648 and 658 million.
Speaker Change: On a consolidated basis, we expect adjusted Eveda to be between 560 and 580 million.
Speaker Change: AFFO guidance is 90 to 105 million.
Speaker Change: Apple expenditures are expected to be in the range of 130 to 140 million, with a continued focus on investing in our digital footprint in the U.S.
Speaker Change: Additionally, we anticipate having cash interest payment obligations of 137 million in the fourth quarter of 2024 and 420 million in 2025. This guide has assumed that we do not re-finance foreign-curric additional debt.
Speaker Change: and now let me turn the call back to Scott.
Scott Wells: Thanks Dave, to recap, business trends remain positive across our portfolio and we were made on track to deliver our full year 2024 financial guidance.
Scott Wells: As we told you at the beginning of the year, 2024 results have been somewhat lumpy quarter to quarter based on 2023 comparatives. But as we look at the full year, we see real progress.
Scott Wells: and were encouraged by the early renewal and development efforts for 2025. This is because we are making inroads in our efforts to expand the range of advertisers we can serve, increase utilization across our platform, and maximize revenue.
Scott Wells: In addition, the expansion of our footprint in New York through the new roadside contract further increases the size of the audience as we can deliver.
Scott Wells: We are committed to executing our strategic plan, including continuing the sail processes related to our international businesses.
Scott Wells: Our ultimate goals include organically growing cash flow and reducing leverage on our battle with sheep.
Scott Wells: Our Progress is evident in our third border AFFO, which exceeded our discretionary downbacks.
Scott Wells: and as noted, we expect the same in the fourth quarter as well as improvement in 2025. And now let me turn over the call to the operator and Justin Cochran, we'll join us on the call.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone and be Kate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: and for a participant using speaker equipment may be necessary to pick up your hands at before pressing the star keys. One moment while we pull for questions.
Speaker Change: Our first question is from Cameron McBay with Morgan Stanley, please proceed.
Speaker Change: Good morning.
Cameron McBay: Be curious, any more color in the New York MCA roadside contract, maybe you know, why now and any more economics behind the deal. And then secondly, could you talk a bit more about the drivers of the improved national ad spend? We've seen some pressure on national outdoor over the past few quarters.
Cameron McBay: So curious, just in your view, what has changed in that structural? Thanks.
Speaker Change: Hey Cameron, good morning, thanks for the questions. I'm going to start actually with your second one first and I'll come back to the MTA and I'm going to hand it to Dave.
Speaker Change: to talk a little bit more about the contract itself. But just on national ad spend environment.
Speaker Change: So there are things that contributed that we drove this quarter like our emphasis on things like CPG, things like pharmaceuticals, things like telecom.
Speaker Change: and there are things that are just math and I think both of them conspired to make the number at the kind of high single digits range.
Speaker Change: and...
Speaker Change: I would just say that it's definitely better than it was a year ago, but there is nothing linear about the way national ad spending is evolving. We continue to see immediate entertainment space that's going through a lot of turmoil and is not...
Speaker Change: You know, bouncing back to the kind of pre-strike.
Speaker Change: Kind of levels. I think everybody is aware of the competitive environment there and all of the different activities that are going on. And so that vertical hasn't really come back.
Speaker Change: and then we have, I mean, it's, it's not terrible, but it's not, it's not great, and it is an important vertical within, within our portfolio.
Speaker Change: and then there are just, you know, putt and takes. Business Services continues to be a very strong performer at the local level.
Speaker Change: So anyway, you asked about national assault, I'll pause, I'll pause there on the national. So it's partly things that we're consciously doing and it's partly just, partly just math. And I'd say that the basic national market looks a lot like the basic national market we've been looking at.
Speaker Change: The Last Several Quarters, so it's lumpy.
Speaker Change: Things are a little episodic, things are a little late to come in.
Speaker Change: But there's money out there to be had and the owners as I must to go get it. Which brings me to your first question, which I'll answer second, which is about the MTA and you started off with why now.
Speaker Change: just to be really clear.
Speaker Change: These are roadside bulletin assets, their assets that kind of stretch around the tri-state area.
Speaker Change: on properties at the MTA controls. So this is all above ground stuff and it's all kind of billboard and poster type inventory. It's not shelters, it's not, you know, transit assets per se.
Speaker Change: and this contract was consolidated back in 2017 and we actually had some of the properties prior to that. That's not really here nor there other than just to emphasize, this is our core business. This is not...
Speaker Change: Some different adjacency. It is...
Speaker Change: Something that is going to give us a better footprint as we negotiate national contracts that we think will have a knock-on effect in other markets.
Speaker Change: and it will certainly be good for our New York operations, both locally and nationally, because it's going to give us the ability to be relevant to a whole bunch of advertisers.
Speaker Change: that we didn't have great solutions for our core New York City assets prior to this contract coming online, which is actually happening tomorrow, the beginning of November. I guess effectively Monday is really the first operational date.
Speaker Change: But the effect of it will be to give us a much richer story in terms of the audience we can deliver in New York And it's a mix of digital and printed assets
Speaker Change: and I'm going to let Dave get into a little bit of the contract details but that's sort of the strategic rationale.
Speaker Change: Yes, thanks, Scott.
Dave: from a financial standpoint, I get the first thing I talk about is the contract starts on November 1st. This definitely will be a little bit of a ramp here, and I'll get into it about the two months of the fourth quarter. So when I'm at a high level, when I'm thinking about this contract.
Dave: As we get into 2020-25, this will add a couple points.
Dave: of Brod from a revenue standpoint, so it's very strong from a top line standpoint. Very good asset, digital and also printed assets, and as Scott mentioned, we could have some of this inventory.
Dave: and Brian, so we're very familiar with it. What it is, municipal contract, the MPA contract, so it is going to be, you know, there's a magnet hatch to this contract. It's a very high rev share. There's some little bit of capital recovery, but you're going to have a...
Dave: I'd rather be sharing the high 70s. So from a margin standpoint, it's not the normal flow through the atom space, but it's absolute.
Dave: Increased in our margin dollars, so a contract we're absolutely looking forward to.
Dave: As I think about it in the fourth quarter, you know, you're probably going to have a little bit of a margin impact to switch it ramping in the contract. Obviously, the max starts, you got to match that from a revenue standpoint. So they'll definitely be obviously some top-line growth in the fourth quarter, a little bit of impact from a margin standpoint in the fourth quarter. As I said, as we get into the next year, you'll have that impact on the top-line of a couple points.
Dave: and there may be a little bit of a margin impact as we get into 2025, but it's definitely more from a top-line standpoint, the elite on the business.
Speaker Change: Yeah, and I think on that point, you know, I appreciate Dave saying that, um...
Speaker Change: There may be a margin impact on it. I know how important operating leverage is to everybody can follow as our business.
Speaker Change: Operating leverage is definitely going to be impacted as we absorb this contract over the next year. Once we get it fully up in operational, you'll see operating leverage get back to a more normal state. But I just don't want anybody thinking...
Speaker Change: that this is going to flow through that 20-25 is going to be a normal year from an operating leverage perspective because this is a big contract and it will, again, just math, impact the margin per cent.
Speaker Change: Over the course of that, but we should see it as the year goes on, normalize and then, you know, future years will look more normal in operating leverage.
Speaker Change: Our next question is from Daniel Asley with Wells Fargo, please proceed.
Daniel Asley: Good morning. I just had two questions. The first, can you unpack any political benefit you had in Q3 and maybe your expectation for Q4, whether it be from crowd out or direct dollars?
Daniel Asley: and then secondly, how should we think about airports growth moving forward? Seems like you fully laughed a ramp of the port authority contract and your two four guide implies a low single digit growth range, so that's something we should be extrapolating moving forward, or there's anything that moves that one layer the other. Thank you.
Speaker Change: Thanks, Daniel. You know, first off on political.
Speaker Change: We definitely have seen some political money come in, we've seen it.
Speaker Change: in our programmatic channels, we've also seen it in our direct channels and it's come from the campaigns themselves as well as from packs.
Speaker Change: Um...
Speaker Change: The numbers are not enormous. You're talking about, you know, over the course of the year, a few million dollars.
Speaker Change: In terms of the impact so I don't think you're going to see us, you know, see the...
Speaker Change: The boom up the boom down that you see in other local oriented media, it just is not.
Speaker Change: It's not a huge driver for us, but it is something we've had some success with this year, it's something that, you know, when the dust settles on Q4 and we finish, you know, we aren't a bunch of swing states.
Speaker Change: When the dust settles on it, we should see, you know, the percentage growth in political people will be big for us, but it'll be on a very, very small base.
Speaker Change: and you know, I don't expect to be coming to you, hadn't hand using it as an excuse a year from now. So hopefully that dimensionalizes political for you reasonably well.
Speaker Change: On airports moving forward, I think we've been signaling for a while now and Dave keep me honest on this one. But I think we've been signaling for a while now that as the buildout matures in the port authority and we don't have any other major contract puts and takes.
Speaker Change: that kind of GDP plus growth that normal at a home has.
Speaker Change: Over Sustain period is probably the right way to think about airports.
Speaker Change: There are definitely things we're working on to enhance our offer and to...
Speaker Change: and further innovate in terms of how we go to market.
Speaker Change: But this team has been on an absolute tear for the last, you know, probably six or seven quarters.
Speaker Change: and I think you're going to see a little bit of a pause there.
Speaker Change: and probably in the next two or three years will have some puttons and takes in terms of contracts. There's nothing like material coming up or anything like that.
Speaker Change: But you're seeing the airport business, you know, they were hit so hard by COVID. A lot of the airport authorities went to direct extension to the post to RFPs.
Speaker Change: So I think it's been a little bit of an unnaturally quiet period in terms of contract stability. Again, nothing like big bits in the immediate headlights, but I think you're going to start to see that crop up in the next couple of years.
Speaker Change: Thank you.
Speaker Change: Our next question is from Avi Steiner with JP Morgan Police Proceeds.
Avi Steiner: Thank you, good morning. I've got three here, like can. One, I'll start with a balance sheet. It's recap of what we look at positive and q3, the commentary pointed to further improvements broadly.
Avi Steiner: In the context of those comments and organically reducing debt with recapital, just wondering how you think about balancing some discount available on some of your debt for some earlier materties that I've got to thank you very much.
Speaker Change: Will take that one then? Yeah sure, no look, thanks for the question I'll be in front of me. Yeah, in the free cash flow stamp, but I feel pretty good where we are right now. I mean we signal
Speaker Change: in the call last quarter about being our AFFO, covering our discretionary or slash for old catbacks.
Speaker Change: to be positive in the second half and we were positive in the third quarter and we're going to be positive in the fourth quarter. And I mean, I can see that for addressing answer again, if it's 2525. So I think that's a good milestone for the business.
Speaker Change: As far as when you're talking about the pay-down of debt, as we start producing free cash for the business, absolutely that's a definite opportunity or outcome with that cash and we would look at our...
Speaker Change: and it's the pricing for bonds right now. The prices are actually pretty strong if you look at the cross or portfolio of assets.
Speaker Change: But I think that's something we're going to get into as we get into this retreat initiatives and as those progress, I think that's the conversation you know where and we're looking at.
Speaker Change: Dead Paydown from that standpoint first, and then that is where obviously January 3, Cashflow, you know, that is just another positive outcome, you know, from that Cashflow, you know, to you, invest in the business or if they're certain that, you know, there's ways we can go after our debt to pay that down. So, that's definitely top of mind.
Speaker Change: Great, and my second question, I just want to dig into the full-year guide a little bit more and what it implies for you, but I would say, I think it's slightly down in the fourth quarter.
Speaker Change: and if you mention the Ridd-A apologize, but anything to call out in the expense side or otherwise that might account for that and then everyone last want to thank you very much.
Speaker Change: I mean when I'm thinking about the guides for the four quarter when I'm thinking about some top line standpoint, I mean for the full year, you know, America at roughly four to five percent, three to seven percent in the four quarter.
Speaker Change: and right now for airports and American, I can say this for Europe as well. In the third quarter we've had record revenue for airports, we're going to continue that in the fourth quarter. The fourth quarter of last year was the biggest storm.
Speaker Change: Reb new quarter we've ever had in airports at 111 million. We're looking to exceed that.
Speaker Change: When you look at the percentage of the other probably not, the golden numbers that we've been seeing over the last six to seven quarters, but when we talked about that, we come up across those coms that will have an effect on the growth rate standpoint.
Speaker Change: and in your North, the Narrow Coming Off of 13-4% growth in the fourth quarter of last year.
Speaker Change: Again, record, mid-or record, quarter last year in the fourth quarter. We're coming up against those cops and seeing a little bit of softness I'd say in the UK.
Speaker Change: and I think the government is kind of rolling out their budgets and the conversations there. I think that's kind of heard growth a little bit in the fourth quarter for Europe, so that's probably when you think about the weakness of the guys in the fourth quarter that's probably where I want you to.
Speaker Change: Yeah, on the, on the cost side there have been some tax, yeah, and increases in Europe and particular in the UK in particular that that impact. You have that and there's also a new couple new contracts ramping overseas and you know, as you're,
Speaker Change: Supplying, cause, you know, as releasing certain assets, you know, that's driving a little bit there as well, but you always do that when you're riding into constructs.
Speaker Change: That's definitely helpful. I appreciate it. And if I can end up on on your side and thank you again.
Speaker Change: So to Spain's Sail side lag for now, I'm just wondering if it changes your thoughts around the process of Europe overall.
Speaker Change: Scott, you mentioned you want to price your flux of value to business. I think everyone can get behind that, but given just how long this has gone on, I wonder if instead of a sail.
Speaker Change: The company might be considering perhaps a spin-off for the business which may not give you the same amount of media cash, but It will allow you to kind of focus on the UF and put all of those assets in one drop business. Here is how you think about that and thank you.
Speaker Change: Hey, Aby, you always ask the easy one, thank you, thank you for that. So I know Spain is on just reading the notes that people wrote this week. I think Spain is on people's minds in different ways.
Speaker Change: and I think...
Speaker Change: You know, David Point won on it.
Speaker Change: is...
Speaker Change: It's just an example of the regulatory state that we live in and that we have to take seriously the regulatory hurdle that we have. We and JCD believe when we ink the deal 17 months ago that this would be able to be done. And it is once that deal is inked.
Speaker Change: It is on the onus of the buyer to work with the regulatory commission and for whatever reason, it didn't get across the hurdle.
Speaker Change: I think some of you recall that we announced Italy and Spain at the same time and Italy was the same scenario where we're competitors in that market, but for whatever reason the dynamics of it.
Speaker Change: the size of the deltas, you know, whatever the nature of the regulatory commission, it only went right through and Spain, you know, obviously didn't, didn't work. So we just can't ever take lightly the regulatory piece. I think the second thing on this that I've heard people ask about.
Speaker Change: is this mean that you can't contemplate a strategic buyer in Northern Europe. I just urge everybody to think about the fact that...
Speaker Change: Strategic is in the eye of the beholder and it doesn't necessarily mean that the person operates roadside assets.
Speaker Change: or outdoor assets, I should say it might be that they're a media company. So I wouldn't rule out the idea that there are strategic entities.
Speaker Change: that would be interested in the business beyond just the names that you know in Adohom advertising. And on your question about structuring, Avi, you know, we, you know,
Speaker Change: We appreciate that this is taking some time, but we also will push back on the fact that interest rates went through the roof and we had a war.
Speaker Change: Launch and a lot of different turmoil in the different markets. And I give our European team just a ton of credit for the performance that Europe, North has put in, which we've called attention to the last couple earnings calls.
Speaker Change: and the Spanish team.
Speaker Change: Despite having had a sail in having a lot of uncertainty about exactly what the form of the new business was going to be.
Speaker Change: and just put their heads down and crush it. And that is, I think, what speaks to the character and capability of our company, and that I'm not going to get over my skis on speculating about how...
Speaker Change: How I'd structure this
Speaker Change: and I'm not anywhere close to that point.
Speaker Change: So hopefully that gives you an answer without getting into all of the, I mean, you and I could spit ball for hours and all the different cool things that we could do to extract money from this and manage it differently.
Speaker Change: But while we're on the stated strategy of selling the markets and working a process, I'm not going to indulge in that on our public earnings call. So hopefully that gives you what you need.
Speaker Change: I'm pretty sad and it's always thank you very much everyone.
Speaker Change: Our next question is from Lance Finntanza with TV Cowin, please proceed.
Lance Finntanza: Hi guys, thanks for taking the question. Sticking with the Europe North, I was surprised given the strength and revenues on the one hand, but...
Lance Finntanza: Coss, obviously, grew more quickly. And could you sort of break that down in terms of what in that Coss side is recurring versus non-recurring, and really what it means for margins in Europe and North going forward.
Lance Finntanza: You mentioned higher sightly suspense and I'm wondering, was that unfavorable renewals or were there perhaps some?
Lance Finntanza: COVID-19, and then related to that, you know, the impact of Norway, which you call out, but could you sort of put some numbers around that, is it possible to talk about what the revenue and EBITDA growth would have been X that Norway contract going away? Thanks.
Lance Finntanza: The End
Speaker Change: Yeah, I'll store it, Lance, and then I'll pass it off to Justin Potter, so I'm more of the details. Below we have a few contracts that are ramping that I was there when Inkree's in calls and you can get that in the beginning. We have property taxes, which is not a one-timeer that's that being increased in the UK. But I'd say more on the rental side that will normalize over time.
Speaker Change: but from that from the margin standpoint.
Speaker Change: I don't expect it to be major change is going forward as we're looking at history and kind of where we are today.
Speaker Change: and McLaughlin Business Guru.
Speaker Change: quite nicely from the top line and the expenses I'd say I think are going to the details I mean.
Speaker Change: Sightleafs is kind of like your normal increases that you're going to have and it can be a little bit lumpy, you know, quarter to quarter. I probably point some of the rental costs is a little bit on production that's by a little bit higher than normal. And then you have the businesses actually performing pretty well, so you add in bonus, you know, from an incentive constant point that's kind of driving a little bit of that from a margin standpoint. But you're just enough, you want to go into more details and some contracts that one.
Speaker Change: Yeah, I think today we've got a couple of things to add. I guess the Norway thing is a bit of a red fairing. It was a big revenue contract, but it was a low margin contract, so there's really no material difference from that.
Speaker Change: As I said, the underlying business margin year on year is actually about the same. There are a few small one-offs here and there, but it's nothing material and nothing I'd expect to change the overall margin profile going forward. And if we hadn't had those in the quarter, we'd have had a similar margin to prior year. So I don't think there's only things structural that shifted. I think it's a few small things that the major margin comes down slightly just in this quarter.
Speaker Change: Thanks so much.
Lance Finntanza: Thanks, Lance. Our next question is from Aaron Rodd, Squiddoyshubay. Please proceed.
Aaron Rodd: Hey everyone, thanks for having me on. Just two questions for me. You've indicated in the past that cancellation has been a precursor to downturns in your business. I think as of the last call you hadn't seen any notable activity on that front.
Aaron Rodd: is that's still true today and any early indications from your ad clients on commitments for early 2025. And then secondly, on the National Business here in the U.S.
Aaron Rodd: and turning the quarter into fourth quarter and turning the quarter into twenty twenty five. Are you feeling any headwinds from all the streaming add inventory that has come online this year?
Aaron Rodd: is, do you think that's a part of the reason for a sustained chopping is a national throughout the last 12 months and something you might expect to continue going forward.
Speaker Change: Thanks Aaron, yeah, no good, good couple of questions. So on the cancellation front, no, we have not seen an uptick.
Speaker Change: in cancellation activity. And yes, the early 2025 conversations are pretty encouraging. We are very early into...
Speaker Change: That Renewal season, but we are encouraged by the number of parties that are looking to renew and that are looking to renew, you know, potentially with expanded commitments.
Speaker Change: So, you know, it's way, way, way too early to be guiding on 2025, so please don't any of you ask me to give you, you know, what percent are we going to call for 2025 but, um...
Speaker Change: I do think that we are positioned well heading into 2025. On National!
Speaker Change: You know, I...
Speaker Change: The money is there. I think that is the critical thing. And so the onus is on us.
Speaker Change: to figure out how to tap that money and whether that's bringing an advertiser to an agency.
Speaker Change: Bringing an idea to an advertiser and getting the advertiser to advocate that to an agency, which is something we're doing increasingly.
Speaker Change: or whether that's being particularly creative in how we're packaging solutions when we get RFPs.
Speaker Change: which is kind of the core way a lot of the national gets.
Speaker Change: and gets done. But you have heard us talk about.
Speaker Change: The efforts that we've gone on in things like Pharma and CPG and Beer.
Speaker Change: We are getting very close to bringing somebody in to help us focus on automotive.
Speaker Change: So that's an area that I think you'll hear us talking more about.
Speaker Change: As we go, we have existing relationships in telecom and in auto insurance that are important categories, media entertainment is an important category where we have relationships at the advertiser level. So we are looking to leverage...
Speaker Change: Those advertiser level conversations and help them all see how out of home can amplify what they're doing in other places.
Speaker Change: I can't really comment on cross-pressure from all the streaming inventory that's one line.
Speaker Change: I do think...
Speaker Change: that, you know, when I look across our global portfolio, I see us getting more TV budgets.
Speaker Change: in every country other than the U.S.
Speaker Change: and so I would attribute at least some of that to the number of video options that there are in the US. That would be more than just the streaming folks, but certainly the streaming folks are probably having some impact there. But I really don't think we should as an industry accept that as an excuse.
Speaker Change: The fact that we don't have video, it's a challenge, but the reality is that our assets amplify video and that smart advertisers use a mix.
Speaker Change: of different types of advertising to land their campaigns in the most cost-effective way. The owners are not to prove to them that that's the case.
Speaker Change: and get that done. So that's what we're focused on and national. I don't think it's going to become less choppy anytime soon, just given the general...
Speaker Change: Degree to which, you know, there's very regular CMO changes, there's a lot of CEO changes going on.
Speaker Change: in the world right now too. So there's...
Speaker Change: There's no shortage of...
Speaker Change: of things that cause people to change strategy and change direction. The critical thing for us is to be at the table with the right people so that when those changes come down, we're part of that conversation.
Speaker Change: Very helpful, thanks Scott.
Speaker Change: Thanks, sir.
Speaker Change: Our next question is from David Timoski with JP Morgan, please proceed.
Speaker Change: Hey, this is Scott A. Sing's on for David Kronowski. Just had a question on local. It's continued to be an outperformer for you in the industry. McRazbin's supportive, but could you talk about if there are any other secular dynamics to consider and how some of the major categories like...
Speaker Change: So that's a broad question and there's no question that legal has been an important vertical for us and the dialogue that we have.
Speaker Change: with the legal entities and you know, I talked a minute ago about some of the verticals we're focusing on nationally. Legal is one we've been focused on at the local level for some time and we have.
Speaker Change: Individuals in our markets who are very fluent in the strategy of the different legal service providers are pursuing and how we can complement them.
Speaker Change: You know, we strive to do that also with things like auto dealers and restaurants, retail, those kind of areas and are working in different degrees to get after it. But I think the core thing is...
Speaker Change: That local advertising market continues to very much be in play among local other local media. Possibly including things like search as a local media because it can present as an intensely local.
Speaker Change: I think I can, as can social.
Speaker Change: and so the local market from is lively and vibrant and we are expanding our teams locally, we're expanding capabilities locally, we're training people up on how to sell.
Speaker Change: in conjunction with digital and how to amplify digital campaigns.
So there's a lot of things we're doing to strive to keep that part of things going. And I think the other element of local is the local agencies.
and a somewhat different fashion than the national, like large folding company agencies do. And that creates some opportunities at the local level. So the good news is we are intensely local medium, we're a medium where people like to see.
their products supported at that local level and feel good that we've got a good runway of growth opportunity there when you just think about the amount of advertising expenditure to the local level and our relative share of it.
Speaker Change: Awesome, thanks so much.
Our final question is from Patrick Schill with Barrington Research, please proceed.
Thank you, good morning. I was wondering if you could talk on the airport side with the kind of slower growth in digital from that segment and then also circling back to the MTA.
I guess, in sort of adding and ramping up a contract of that size, I guess. How do you go about, like...
limiting some of the cannibalization from other assets in that market, in the market.
Great. So, Pat, let me start on the digital growth in airports.
You know, I think Dave referenced this a minute ago, but our comp. You know, we have been setting quarterly records and airports for a number of quarters now. Probably going back.
to the early part of...
Speaker Change: 2023. Yes. So we have been...
We have been growing that space pretty substantially when you think about the split.
between digital and printed and airports. What you've really seen, if you go back and you look at our digital growth during those periods, the main driver for much of that time.
and I think partly what you're seeing is just a little bit of rebalancing and it can be.
Speaker Change: You know, only a couple of deals can swing you one direction or another.
Speaker Change: Um...
on this in terms of
If people are going for domination on printed assets, it can cause the printed number to...
to spike up and I don't have kind of a campaign by campaigns.
Speaker Change: Play, but if you think about just what the advertiser is trying to...
to accomplish a lot of times they're trying to dominate the share of voice in a particular location.
Speaker Change: and a great way to do that is on the printed asset. I mean, we see that, I think people have expected for years that we were going to see the printed roadside asset shrink while the digital assets grew.
and the digital assets have grown, but the printed have held their own in most quarters of showing some growth and this quarter is pretty healthy growth that we had the roadside printed. So I think it's a little bit of advertiser preference and a little bit of...
Speaker Change: You know how the campaigns are laying in. I certainly am not hearing anything that suggests there's any issue in digital sales in the airports. I think it was probably just a couple of print heavy share of voice heavy campaigns that came in pat.
Speaker Change: So that's on the airport's digital growth and hopefully that clarifies it for you. On the New York inventory,
Speaker Change: The reality for us is that...
Our presence in New York is disproportionately in time square and on large assets at choke points like tunnels and bridges.
We don't have prior to this contract activating tomorrow, we didn't have a particularly robust.
Speaker Change: Um...
sort of a run of market, kind of distribution.
This gives us a really healthy distribution along and around the kind of I-95 and LIE.
Corridors that we really shouldn't expect that there's going to be a whole lot of cannibalization for it. I mentioned briefly at the outset, you know, we operated.
You know, a portion of these assets, nothing like the whole portfolio we just picked up, but maybe 20% of the portfolio we picked up.
Speaker Change: Prior to 2017 when MTA consolidated and bid out that group assets the first time.
So, it's areas we're familiar with and it's areas that we know well, but there's not a lot of other assets of ours to take things off of, so this should be very largely incremental for us.
Hope we have any answers or questions.
Thank you.
Speaker Change: This will conclude our question and answer session. I would like to turn the conference back over to Scott Wells for closing remarks.
Great, well we appreciate the questions in the engagement. You know I think the thing I just end on is that in the season of uncertainty around the election and in the ongoing uncertainty around macro direction of the country and what lies ahead
When I look at our business...
Speaker Change: We are looking at records across all of our principal lines of business in Q3 and a healthy business should be setting records regularly so there's nothing.
particularly that I want to thump my chest on on that, but I just want to call out.
Speaker Change: that...
There has been this sustained concern about what was around the corner and where things were and I'm certainly not going to say that there is an uncertainty in this world and that there isn't a chance that
that we see a recession or things like that come up. But I think when you look at the performance of this business with a lot of uncertainty in parts of the business where we've been selling them,
That should give us a lot of credibility for our ability to execute. And I just want to end with thanking the teams for all the work that they've done on those points to be able to be in a position where we have records.
across the portfolio and wish everyone a happy Halloween and a good start to the holidays season because everything kind of picks up in velocity from here. Thanks everyone.
Thank you, this will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.
Speaker Change: The