Clear Channel Outdoor Holdings Inc
NYSE:CCO
Earnings Call Analysis
Q4-2023 Analysis
Clear Channel Outdoor Holdings Inc
The company experienced a significant increase in consolidated revenue for the fourth quarter, up by 12.4% to $632 million compared with the same period last year. Adjusted for currency fluctuations, the revenue increase stands at 10.8%. However, income from continuing operations saw a substantial decrease, plummeting to $25 million from the previous year's $106 million. Including income from discontinued operations, consolidated net income totaled $26 million. Adjusted EBITDA rose by 9.2% to $190 million, and the company saw a substantial 30.2% rise in Adjusted Funds From Operations (AFFO), reaching $73 million.
The Americas segment witnessed a modest revenue growth of 0.5% with $299 million, thanks in part to digital deployments and programmatic growth. Different sectors performed variably, with the Business Services and Pharma sectors experiencing growth, while the auto and media and entertainment sectors experienced declines. Regionally, the South Central and Southeast regions stood out with robust growth. Digital revenue made up 38.2% of the segment's revenue, increasing by 2.4% to $114 million. Adjusted EBITDA for the Americas segment inched up 0.6%, reaching $136 million, with a robust adjusted EBITDA margin of 45.6%.
The Airports segment achieved a stellar revenue increase of 44.3% to $111 million, fueled by higher demand and ongoing investment in digital infrastructure. Significant verticals within this segment included banking and financial services and the travel and transportation sector. Digital revenue, comprising 65.7% of the segment's revenue, shot up by 57.9% to $73 million. The segment's adjusted EBITDA followed suit, jumping 42.7% to $30 million, and the adjusted EBITDA margin remained solid at 27.1%.
Revenue for the Europe-North segment increased by 13.4% to $185 million. Growth was spurred across various products and countries, especially in the U.K. and Belgium, where there was a surge in demand and digital display deployments. Digital revenues contributed significantly, growing by 17.9% to $105 million, representing 57% of the segment's total revenue. Adjusted EBITDA for the segment reflected this positive trend with a 13.1% increase to $50 million.
Clear Channel International BV (CCIBV) reported a 17% surge in revenue to $198 million, which adjusts to a 12.6% rise when excluding the impact of foreign exchange movements. The increase was primarily driven by performance improvements in the Europe-North segment. Operating income for CCIBV was $31 million, representing a strong operational period.
The company's capital expenditures for the quarter were reduced by $4 million year-over-year to $48 million, aligning with the timing and a decrease in spending. Despite this, the company maintained a healthy liquidity position with $486 million available as of the end of December.
Total debt remained relatively stable at $5.6 billion. The weighted average cost of debt stood at 7.5%, with a first lien leverage ratio of 5.54x. Interest payments on debt saw a slight reduction of $3 million to $121 million during the quarter, attributed mainly to changes in payment timings and partially offset by increased interest rates.
Looking forward, the company projects that consolidated revenue for the first quarter will be between $465 million and $490 million, representing a growth of 6% to 12%. Overall, 2024 is forecasted to bring in consolidated revenue of $2.2 billion to $2.26 billion, equating to a 3% to 6% year-over-year increase. In terms of Adjusted EBITDA, expectations are set between $550 million and $585 million. AFFO guidance ranges from $75 million to $100 million, indicating continued growth. Finally, anticipated capital expenditures for the year are projected to be in the range of $130 million to $150 million, underscoring a strategic focus on digital enhancements within the U.S., and cash interest payments are expected to be approximately $448 million in 2024 and $408 million in 2025.
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Ladies and gentlemen, thank you for standing by. Welcome to the Clear Channel Outdoor Holdings, Inc. 2023 Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
It's now my pleasure to turn the call over to Eileen McLaughlin, Vice President, Investor Relations. Please go ahead.
Good morning, and thank you for joining our call. On the call today are Scott Wells, our CEO; and Brian Coleman, our CFO. They will provide an overview of the 2023 fourth 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 in our investor website and review the presentation during this call.
After an introduction and a review of our results, we'll open the line for questions and Justin Cochrane, CEO of Clear Channel U.K. and Europe; and David Sailer, CFO of Clear Channel Outdoor Americas, will join Scott and Brian during 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 goals. All forward-looking statements involve risks and uncertainties, and there can be no assurance that management's expectations, beliefs or projections will be achieved or that the actual results will not differ from expectations. Please review the statements of risks contained in our earnings press release and our filings with the SEC.
During today's call, we will also refer to certain measures that do not conform to generally accepted accounting principles. We provide schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of the earnings presentation.
Also, please note that the information provided on this call speaks only to management's views as of today, February 26, 2024, and may no longer be accurate at the time of a replay.
Please turn to Slide 4 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 us today. We generated consolidated revenue of $623 million for the fourth quarter, excluding movements in foreign exchange rates, reflecting a 10.8% increase as compared to the prior year and exceeding our fourth quarter guidance. Our results reflect a strong performance from Airports in Europe-North and improving business trends in the Americas segment with America returning to growth.
Recapping the past year in our Americas segment, after a very encouraging upfront in the U.S., the theme for many of our clients was delayed decision-making as they waited for signs of clarity on the direction of the economy. We also saw softness in select markets, particularly in the San Francisco Bay area, as well as in select categories, led by media and entertainment, technology and auto. These factors, combined with difficulty in fully staffing our local sales teams, made for a challenging year.
The good news is that, in the latter part of the year, business started to improve with demand picking up after Labor Day and continuing into the current quarter. We're seeing some demand improvement in California. We have shown strong growth in the verticals we've been targeting. And we've made progress in hiring and onboarding salespeople in our local markets. While there is still some level of uncertainty in the market, advertisers are becoming more comfortable in making decisions, and we're continuing to see improving trends in the current quarter across key verticals and markets.
Our Airports team delivered a record fourth quarter and an exceptional year after a slow start, driven by the investments we've made in digital, primarily related to the New York airports, but with strength across the portfolio. Advertisers are focused on premium inventory, which benefits our airports business with the strength in travel and transportation, telco and banking, among other categories.
And the Europe-North team continues to deliver with increased revenue across our products and most of the countries in which we operate, driven in part by increased demand, deployment of additional digital displays, and strong programmatic growth.
We remain focused on delivering on our strategic road map, which is aimed at enhancing the profitability of our business, focusing on our higher-margin U.S. markets and transforming into a technology-fueled visual media powerhouse reaching a growing audience. Delivering a digital media experience remains central to our investment strategy, both in terms of expanding our footprint in the U.S. and strengthening our ability to serve a greater range of advertisers and drive revenue growth. We're progressing and delivering the kind of experience advertisers expect from digital media, coupled with the mass reach and creative impact of out-of-home.
Additionally, our investments in data and analytics and programmatic are enabling us to engage with advertisers that haven't typically invested in out-of-home. We're also experimenting with using AI capabilities to develop creative, increasing productivity and allowing us to help more customers imagine their brands on out-of-home than we could with traditional tools. We believe this could prove to be a growth driver over time.
Drilling deeper into our America growth strategy, our national sales team continues to work on penetrating new verticals and developing our client direct sales approach, and we're continuing to see early success in both pharma and CPG. Revenue in our pharma vertical doubled last year and was a large contributor to America revenue growth in 2023, due in large part to our focus on developing the insights and campaign measurement tools the pharma industry requires. This is an excellent example of the power of applied data to out-of-home.
Another excellent example is the progress we're making in programmatic, which had a record fourth quarter and has driven our recent success within the CPG vertical. We wouldn't have been able to make inroads into CPG, which has traditionally not been a big user of out-of-home in the U.S. and prefers data with its impressions.
We've also started generating meaningful revenue through our new website in the U.S., and we believe these enhanced revenue streams have good growth potential over time. We're also focused on fully staffing our sales teams where our staffing levels have stubbornly lagged our post-COVID business recovery. We've made significant progress in our onboarding capability and in strengthening our training, in line with the expansion of the solutions we offer.
On the M&A front, we're continuing with the sales process of our businesses in Europe-North segment. And we have commenced the process to sell our businesses in Latin America, as well as evaluating related paths to optimize our cost structure. The goal is to streamline our organization to focus on our U.S. markets, further strengthen the operating leverage in our business and improve cash flow. It's worth giving our teams currently involved in these processes a shout out for their continued strong performance despite the distraction.
Turning to our forecast. Full year consolidated revenue is expected to reach between $2.2 billion and $2.26 billion, representing a mid-single-digit increase over last year, excluding movements in foreign exchange rates. Brian will provide a detailed overview of our guidance in a moment.
In the first quarter, we're off to a good start, and our business is growing. In the Americas segment, we're seeing a better climate in the majority of our markets, including our largest markets in California with the San Francisco Bay Area showing signs of improvement. Our largest vertical, Business Services, remains strong, as well as Amusements and Retail. And the end of the strikes has been a welcome development and is having a positive impact in the entertainment vertical in California and beyond.
Airports continues to deliver excellent results, and the business remains strong given the premium nature of our inventory. Europe-North is also off to a good start with ongoing strength in the U.K. and Sweden, our largest Europe-North markets, offsetting the impact of contract losses, including a contract in Norway. So we're encouraged with the trends we're seeing and the opportunities we're pursuing to drive growth in the year ahead.
Finally, before turning the call over to Brian for the financial review, I would like to thank him for his many years of service to Clear Channel. He has been instrumental in charting our financial course through the often difficult process of managing the capital structure we inherited at separation from iHeartMedia. He has also contributed to our strategic plan and led our finance team through many transactions, refinancing efforts and the like. I look forward to continuing to work with him in his role as a consultant, along with our Board, management team and financial advisers in delivering on the next stage of our plan.
David Sailer, who will succeed Brian as CFO of Clear Channel on March 1, has been a proven leader overseeing the financial strategy and operations of our America and Airport segments. He has also been central to our efforts to streamline our portfolio with the responsibilities he's had as Head of Corporate Development. I believe this experience will be instrumental for us as we become a more focused U.S.-centric company.
With that, let me hand the call over to Brian.
Thank you, Scott. Good morning, everyone, and thank you for joining our call. Although it is my last time speaking with you in this role, I strongly believe we are transitioning with a lot of positive momentum, as you will soon hear about as we discuss the company's performance and expectations.
Moving on to the presentation in Slide 5. As a reminder, Europe-South is now included in discontinued operations. And during our discussion of GAAP results, I'll also talk about our results, excluding movements in foreign exchange rates, a non-GAAP measure. We believe this provides greater comparability when evaluating our performance. Direct 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 refer to are for the fourth quarter of 2023 and the percent changes are fourth quarter 2023 compared to the fourth quarter of 2022, unless otherwise noted.
Now onto the fourth quarter reported results. Consolidated revenue for the quarter was $632 million, a 12.4% increase. Excluding movements in foreign exchange rates, consolidated revenue for the quarter was up 10.8% to $623 million. Income from continuing operations was $25 million, a decline over the prior year's income from continuing operations of $106 million. Consolidated net income of $26 million includes income from discontinued operations.
Adjusted EBITDA was $190 million, up 9.2%. Excluding movements in foreign exchange rates, adjusted EBITDA was up 8.1%. AFFO was $73 million in the fourth quarter, up 30.2%. Excluding movements in foreign exchange rates, AFFO was up 27.3%.
Now onto Slide 6 for the Americas segment fourth quarter results. America revenue was $299 million, up 0.5%, driven by digital deployments and programmatic growth. The Business Services and Pharma verticals were up in the quarter, while auto and media and entertainment were down. A majority of our markets delivered growth, with the South Central and Southeast regions having the strongest results. Northern California has improved relative to earlier in the year, although it was still down in the quarter.
Digital revenue, which accounted for 38.2% of America revenue, was up 2.4% to $114 million. National sales, which accounted for 37.1% of America revenue, were up 0.3%. Local sales accounted for 62.9% of America revenue, rising 0.6%.
Direct operating and SG&A expenses were up slightly to $163 million. Site lease expense was up 2.1% to $90 million driven by lower rent abatements. This was offset by lower property taxes related to a legal settlement, maintenance costs and credit loss expense.
Segment adjusted EBITDA was $136 million, up 0.6%, with a segment adjusted EBITDA margin of 45.6%. Please see Slide 7 for a review of the fourth quarter results for Airports.
Airports revenue was $111 million, up 44.3%. Revenue was up across most airports and verticals, another really strong quarter, with the increase in revenue driven by increased demand and continued investment in digital infrastructure. Banking and financial services as well as travel and transportation were among the top-performing verticals in this segment.
Digital revenue, which accounted for 65.7% of Airports revenue, was up 57.9% to $73 million. National sales, which accounted for 58.9% of Airport revenue, were up 42.4%. Local sales accounted for 41.1% of Airports revenue and were up 46.9%.
Direct operating and SG&A expenses were up 44.8% to $81 million. The increase is primarily due to a 46.4% increase in site lease expense to $65 million driven by higher revenue as well as higher variable incentive compensation costs. Segment adjusted EBITDA was $30 million, up 42.7%, with a segment adjusted EBITDA margin of 27.1%.
Next, Slide 8, for a review of our performance in Europe-North. My commentary on Europe-North is on results that have been adjusted to exclude movements in foreign exchange rates. Europe-North revenue increased 13.4% to $185 million due to higher revenue across all products and countries, most notably the U.K. and Belgium, driven by increased demand, deployment of additional digital displays and new contracts.
Digital accounted for 57% of Europe-North total revenue, was up 17.9% to $105 million. Europe-North's direct operating and SG&A expenses were up 14.5% to $135 million due to an increase in site lease expense, up 12% to $62 million, driven by higher revenue as well as higher property taxes and compensation costs. Europe-North segment adjusted EBITDA was up 13.1% to $50 million, and the segment adjusted EBITDA margin was 27.3%.
Moving on to CCIBV on Slide 9. Clear Channel International BV, or CCIBV, an indirect wholly owned subsidiary of the company, and the issuer of our 6 5/8% senior secured notes due 2025, includes the operations of our Europe-North and Europe-South segments, as well as Singapore, which is included in Other. The financial results of Singapore are immaterial to the results of CCIBV. And the revenue and the scale of the company's business in Singapore will be further reduced in 2024 due to the loss of a contract which terminated on December 31, 2023.
As the businesses in Europe-South segment are considered discontinued operations, results of these businesses are now reported as a separate component of consolidated net income and the CCIBV consolidated statement of income for all periods presented and are excluded from the discussion below.
CCIBV results from continuing operations for the fourth quarter of 2023 as compared to the same period of 2022 are as follows. CCIBV revenue increased 17% to $198 million from $169 million. Excluding the $7 million impact of movements in foreign exchange, CCIBV revenue increased 12.6% driven by higher revenue in our Europe-North segment, as I just mentioned. Singapore represented approximately 3% of CCIBV revenue from continuing operations for the 3 months ended December 31, 2023. CCIBV operating income was $31 million, compared to $22 million in the same period of 2022.
Now moving to Slide 10 and a review of capital expenditures. CapEx totaled $48 million in the fourth quarter, a decrease of $4 million over the prior year due to timing and a reduction in spend.
Now on to Slide 11. Our liquidity was $486 million as of December 31, 2023, down $45 million compared to liquidity at the end of the third quarter, due to a reduction in cash, slightly offset by an increase in availability under the credit facilities. During the fourth quarter, cash and cash equivalents decreased by $62 million to $252 million, driven by interest payments, capital expenditures, cash delivered to the buyer related to the sale of our business in France, and changes in working capital.
Our debt was $5.6 billion as of December 31, 2023, basically flat to September 30, 2023. Cash paid for interest on debt was $121 million during the fourth quarter, a $3 million decrease compared to the same period in the prior year, primarily due to differences in the timing of interest payments, partially offset by an increase in interest rates. Our weighted average cost of debt was 7.5%. And as of December 31, 2023, our first lien leverage ratio was 5.54x. The credit agreement covenant threshold is 7.1x.
Now onto Slide 12 and our guidance for the first quarter in the full year of 2024. All consolidated guidance and Europe-North guidance excludes movements in foreign exchange rates, with the exception of capital expenditures and cash interest payments.
For the first quarter, we believe our consolidated revenue will be between $465 million and $490 million, representing a 6% to 12% increase over the first quarter of 2023. We expect America revenue to be between $245 million and $255 million, and Airports revenue is expected to be between $74 million and $79 million. Europe-North revenue is expected to be between $130 million and $140 million.
Moving on to our full year guidance. We expect consolidated revenue to be between $2.2 billion and $2.26 billion, representing 3% to 6% increase over 2023. America revenue is expected to be between $1.135 billion and $1.165 billion. Airports revenue is expected to be between $345 million and $360 million. Europe-North revenue is expected to be between $635 million and $655 million.
On a consolidated basis, we expect adjusted EBITDA to be between $550 million and $585 million. AFFO guidance is $75 million to $100 million. Capital expenditures are expected to be in the range of $130 million and $150 million, with a continued focus on investing in our digital footprint in the U.S. and lower corporate CapEx. Additionally, we anticipate having cash interest payment obligations of $448 million in 2024 and $408 million in 2025.
The expected increase in cash interest payments in 2024 is largely due to the differences in timing of interest payments between the recently issued CCOH 9% senior secured notes and the refinance portion of the term loan. We expect $100 million of cash interest expense to be paid in the first quarter. This guidance assumes that we do not refinance or incur additional debt.
And finally, before I turn the call back to Scott for his closing remarks, I'd like to thank him for his kind words and his camaraderie and support over the years, as well as extend my appreciation to the entire Clear Channel team for their hard work and dedication to pursuing our vision. We've made substantial progress in pursuing our objectives, and I believe we'll continue to deliver in the year ahead and beyond.
I'd also like to congratulate Dave on assuming the CFO position. I've worked with Dave for about 10 years, more closely since the separation from iHeartMedia. And I know he will do a great job in his expanded role in the company. This is a smooth transition, and I look forward to continuing to work with Scott and Dave, as well as our Board and advisers, as a consultant, as we continue to focus on moving our plan forward.
And with that, let me turn the call back to Scott.
Thanks, Brian. Looking ahead, we remain focused on delivering profitable growth, strengthening our balance sheet and further demonstrating the operating leverage of our business. These efforts all reflect our priority to reduce leverage over the next few years. As our guidance indicates, we expect we will see growth in America after a lackluster 2023. We believe the recovery in some key markets, plus execution of our specific growth plans, should provide that acceleration.
We're committed to exiting Europe and Latin America at values consistent with the quality of these assets, as we streamline our business and concentrate on our higher-margin U.S.-based assets. The work we've done already to strengthen our financial performance in Europe-North puts us in a position of strength from which to work. As this is an active time in both processes, we will provide updates as and when we are able.
I would like to express my gratitude for all the work our company-wide team is doing. We're making good progress operationally and financially as we continue our disciplined pursuit of cash flow growth.
And now let me turn the call over to the operator, and Justin Cochrane and Dave Sailer will join us on the call.
Before we begin the Q&A this morning, Brian Coleman would like to make a quick statement, then we'll move directly into the Q&A. Thank you.
Thanks, Kevin. This morning, we issued a press release announcing a refinancing transaction, whereby the company intends to issue new senior secured notes to repay a portion of the company's Term Loan B facility and to extend the maturity of the remainder of the facility. Please note that at this time we cannot comment further on these transactions.
Additionally, while the company still plans to present at JPMorgan's 2024 Global High Yield and Leverage Finance Conference on February 27, 2024, the company no longer plans to make available on its investor website a webcast or a replay of its presentation.
Now I will turn the call back to the operator for Q&A. Thank you.
[Operator Instructions] Our first question today is coming from Cameron McVeigh from Morgan Stanley.
I just had a couple. I was curious, if you hit the midpoint of the Americas revenue guide, should we see operating leverage flow through and see margin expansion?
Yes. I think as we continue to see revenue growth, you should expect to see margin -- as you get higher revenue, you will get a little bit higher flow-through -- so you'll see slight margin improvement on that.
Great. And then secondly, Airports have been performing incredibly well recently. Could you discuss some of the growth drivers and how much of an impact general ridership trends have over digital conversions and then just budget share shift?
So there's a number of things going on with Airports. I mean, obviously, we secured the New York, New Jersey Port Authority during COVID. So in the early part of 2020, we were negotiating that. We started operating it in 2021. And we completed build-outs that we're lapping -- we're in the process of lapping in a number of the airports. Most notably Terminal A came online at the beginning of 2023, Terminal A at Newark, came online at the beginning of 2023. And so Q4 would have been the first lap of that important new inventory. And so I think there's that contract effect.
The growth in our overall portfolio, we have the kind of extraordinary growth that we're lapping because of the build-outs in New York. But the overall portfolio has performed very strongly as well. And that definitely correlates with the strong air travel. And I think it also correlates with the market trend toward really high-quality, really well-defined audience delivery. And we've seen that in the America business at the super premium end of that spectrum. So there's a lot of factors going into it.
I guess the last thing I'd give a call-out, it's not just the large advertisers, the local teams have been doing really well. And the local teams in conjunction with our roadside local teams as well, we cracked the code on cross-selling between those businesses a couple of years ago, and that's only accelerated. And we're starting to do some pretty innovative things in terms of thinking about almost a sponsorship type of model in different geographies, particularly where we have roadside and airport inventory that's pretty interesting. So we're doing some pretty innovative things in terms of how we're selling as well. I think those are all the factors.
Our next question today is coming from Steven Cahall from Wells Fargo.
Scott, maybe to just follow up on Cameron's first question and put a finer point on it. I think in Americas, in '23, you had some site lease expense that increased somewhat idiosyncratically. Just trying to understand if there's anything in Americas that's also kind of one-off in 2024. I think typically you've talked about the business as having about 50% -- fixed costs. So as we think about revenue growth in Americas in 2024, any good way to think about the fixed versus variable cost?
And then also, I think you talked about cost reductions or cost optimization that you're looking at in the press release. Could you provide a little more color as to where we might see those? Is this either in Airports or Americas? Is this proactively taking out some of the corporate costs as you move towards the divestitures?
And then finally, is there any good way to think about EBITDA ranges for either Europe-North or LatAm since those are now valuation basis and divestiture scenarios?
Okay, Steve. I'm going to try to get all of these, but I'm sure you kept the list in case we miss any of them. On the one-offs, I do think we are finally getting to a place where we're going to have a pretty clean year in America. We have lapped that slightly increase. I'm going to let Dave speak to where we are relative to onetime abatements, but those largely washed out. In the case of 2023, there may be a couple of things still lurking out there, but nothing that large. Dave, do you want to talk for just a second about the operating leverage?
Yes, absolutely. From an Americas standpoint, like the large contract that we have talked about, that has lapped. So as we get into 2024, I mean, you'll have a little things here and there, but don't think anything that's really going to structurally move your cost structure from a site lease standpoint from abatements.
From an Airports standpoint, that's a little bit different. Those are still kind of trickling in. So when we're talking about Airports, those margins will be slightly elevated. They were in 2023, and they will probably be again in 2024. And then I will expect those to kind of cycle out throughout 2024 and then that period will be over from a site lease standpoint for Airports on abatements.
And then the second question was around cost optimization. And I do think the principal cost optimization you'll see over the next 12 or 18 months with us, probably more toward the latter part of that window, because it will take time as you unwind. But it's going to be related to corporate overhead related to the divestitures we're talking about. And we've discussed before at least $30 million of savings. There's nothing we've seen that causes us to think that's not a good sort of ZIP code to speak to on that.
And then in terms of the guide on Europe-North and LatAm, because of everything that's in flight, I don't think those are numbers we're going to give at this point. But if you look at the scale of what those businesses did, I mean you've got a nice fresh 12 months in the K and you presume that their growth is -- Europe is going to actually revert a little bit, I think, relative to what we saw in 2023. LatAm, the 2023 growth may be a little closer to what we see.
But those are not things -- just with the experience of moving things to disc ops and everything like that, the guides become so complicated when you start getting down into the subsegments. We just didn't think that that was appropriate. At some point in the not-too-distant future, it will be a much simpler business to talk about.
So I don't know, Dave or Brian, if you have anything you'd add on the Europe-North or LatAm.
No, no. I think that covers it.
Next question is coming from Jonnathan Navarrete from TD Cowen.
It's Jonnathan on for Lance. My first one is on National sales and the composition it had in America and Airports, it was better than 4Q last year. So given that there were some concerns with National throughout '23, did you see National pick up towards the end of 4Q or towards the beginning, and is that trend also ongoing in '24 so far?
Thanks, Jonnathan. Yes, if you've listened to a number of our calls, you know I always bristle a little at National because it really correlates more to the channel that it's coming through the large advertisers than it's truly National the way the syndicated business in radio or television works.
But for that large advertiser segment, we definitely saw some improvement toward the beginning of Q4. And it correlated with the advertisers that were using the programmatic tool set. The large advertisers using the programmatic tool set is where we really saw that first. And we have seen that continue into this year.
But it's really not -- National is kind of a poor description of it. It's really not -- I think one of our partners describes National as Airports plus New York and L.A., which that doesn't really do National the way that I think other segments think of it. But the stuff that we call National is performing better than it was and seems like it's on a good trend line.
Got it. So on that note, can we also expect, let's say, the typical seasonality of every quarter building on each other? Or because -- is there perhaps a catch-up on National that will occur sometime during the first and second quarter that can throw out that typical seasonality?
Yes. I'm not 100% sure how to think about the idea of a catch-up because this is -- our numbers are comprised of hundreds of campaigns, and I don't think most marketers wake up focused on, okay, I got to catch up the outdoor guys.
I think what you ought to think about is last year was a very choppy year. We had a really tough January and February. March and April were better. May and June, a little less good. Q3 was pretty tough throughout. And then as you got into September, it started to get better. And Q4 was a pretty strong quarter.
So as you think about how the business -- it just was very choppy last year, and I'm hoping that we don't have the same, especially not the kind of, hey, we're going to check out from June to Labor Day dynamic that a lot of those large advertisers had. But it's not for me to say precisely what they're going to do.
When we think about our guide, we don't really build it at the advertiser level. We build it a lot more looking at the market, looking at the inventory position, looking at what we're seeing in the local as well as the national, what's happening with our principal client investment in terms of key accounts. There's a whole lot of things that go into it. We don't really just build it off of a national court forecast, local forecast. I don't know, Dave, if there's more color you'd want to provide on how we get to that guide.
Yes. And I don't -- I think you covered most, but the other area I'd also talked about is just the geography of it. When you think about where we were last year and how Scott was talking about how the year kind of laid out, certain parts of the country, obviously, we're weaker and certain parts were stronger. So as we get into this year, that all kind of plays into when we're setting up our guide on what parts of the country where we see a little more strength and as we're getting into the early parts of 2024.
So I think that -- I don't look at it as like kind of like a bounce back. It's just more where does it get stronger across certain parts of the country, and even certain verticals as well.
Got it. And my last one is just on the litigation payment. I saw in the 10-K that $13 million was paid in October and the balance is expected to be some time, or, I think, in multiple payments throughout '24. And can we expect, let's say, an even distribution throughout 4 quarters? Or is there perhaps a quarter that would be heavier in terms of that $13 million?
I think all we've said is that those payments will be made before the end of 2024. And I think we probably haven't expanded upon that.
Our next question is coming from Aaron Watts from Deutsche Bank.
Brian, I will certainly miss peppering you with questions on these calls and our conferences even if you won't miss that quite as much.
Thanks, Aaron.
So a couple of questions for me. Yes, of course. A couple of questions for me. I guess, first, just to clarify your remarks around margins. Given the moving parts you highlighted it. Should we -- should it be a relatively stable walk this year as we head to that 25%, 26% context implied by your guide? Or will those factors or the choppiness last year cause some movement on a quarterly basis?
I mean, definitely, from a quarterly standpoint, our margins will be different in certain quarters, probably a little bit lower earlier in the year and they get stronger towards the end of the year just because you have more revenue in the second half, that's going to increase your margins. But I think that 25 you're talking about probably makes sense. Obviously, it breaks out different across our segments across America, Airports and Europe. But overall, I think that's fair.
I mean you'll see a little bit, as I mentioned earlier in the call, you're still going to be getting relief on the airport segment, so that will be slightly elevated in '24, and I think that will settle down as you get past 2024 from that cycle of release.
Okay. Helpful. And then on the housekeeping side, I apologize if I missed this, but how should we be thinking about cash taxes for this year?
I wouldn't think of them too much differently than what we've seen in the past, and that is fairly minimal cash taxes, mostly related to international and local sales and local taxes in the U.S. We have an election that we make that minimizes our federal income tax obligations, and we would expect that.
Now all that being said, Aaron, that doesn't include potential asset sales. We have made the statement that we believe that our European North sales would not attract any material cash taxes. Now that of course is dependent on how those sales are conducted. But as of right now, I wouldn't see any kind of significant change in our cash tax payments or the range.
Okay. Perfect. And then last one for me, and I appreciate the time. You recently announced some changes to your Board. Just curious if that signals any change in the day-to-day operating modus for the business and/or kind of the future strategic direction for Clear Channel beyond the Americas-centric focus you've been highlighting.
Thanks, Aaron. I don't think that -- I mean, look, our Board is -- this is a challenging Board. And having a good mix of perspectives on the Board is incredibly valuable. And I think that's how to read what maneuvering we have done. This is a business where, because of our capital structure and because of where we live in the spectrum of media, you need to be able to think fast and slow, and you need to have a long-term plan coupled with a lot of agility to be able to go and do things like what we're doing with the refinancing that we're working on right now. Touch wood, we'll see as that process works out.
And so it's important to have fresh perspective on the Board, and it's important to have people who understand the world in which you're operating. And I think that's the sum total of what we're doing with the Board.
Next question today is coming from Richard Choe from JPMorgan.
I just wanted to follow up on the Americas strength for the first quarter. How much of that is coming from the digital programmatic trends versus maybe just kind of the rebound you talked about with regions in terms of like Northern California and L.A.?
Thanks, Richard. The piece parts are all pretty intertwined. I mean, when you think about the first quarter that we had last year, the challenge was actually less in America than it was in Airports, particularly the early part of the quarter. But no part of the business had a great start to last year. And so coming out of the gate strong is very, very helpful.
Programmatic is definitely strong. But interestingly, last first quarter, programmatic was actually quite strong as well. So it's not just that. I do think that some of the development work we've done on some of our emerging verticals, we have a couple of scale, new clients that we brought in directly that are coming online in Q1. So there's a number of things contributing to it. And just frankly, getting past where we first started seeing trouble in Northern California in the latter part of 2022 really manifesting in the beginning of 2023. So we're lapping that.
And our numbers are not so large that that doesn't have an effect on it. So I think it's kind of all of the above. I wish it was a simple thing, and I'd go do a lot more of that simple thing. But it's the combination of a number of factors.
And you mentioned pharma really kind of being a good growth driver. Is that skewed to Americas or Airports a little bit more? Or does it help with both?
It is principally in America right now where we're seeing the strength of it. I think it could translate into airports. But the real sweet spot of what we're doing in pharma are for drugs that have a very broad application. And that lends itself to the roadside asset even more so than airports where you get more of a segmented audience that's being delivered. So I think that's the -- it is definitely more skewed toward the roadside business.
Your next question is coming from Jim Goss from Barrington Research.
I've got a couple about Airports first. The rebound in air travel seem to come in pretty well, but it -- and it seemed to be more in terms of personal rather than business travel. So I'm wondering if that shift in mix in favor of personal versus business travel is still true. And does that impact demographics and/or pricing and the strategy of the ads you'd put on?
Thanks, Jim. It's a good question, and there's a couple of things that go into it. First of all, I do believe that the rebound is still more skewed to personal than business, but you have seen international travel, including international travel Asia, start to perk up, which oftentimes -- I mean, I think one of the big trends, I've certainly seen a number of articles about this, is people bundling business trips with personal trips, bringing family members along when they're going on an extended commercial trip and then tacking on a vacation. I think some of those dynamics are playing out.
But we definitely have seen business travel rebound. It's probably not all the way back to where it was before pandemic. But I'm not sure how well we've ever really -- how good the metrics are that are around that.
In terms of how that translates, with the buy it depends a lot on the customer -- on the client, that you're talking about, the advertiser you're talking about, because we have B2B-oriented advertisers that target particular airports, particular terminals within airports, or they'd go after the private jet FBOs. And we have B2C products. And the thing about the B2B, oftentimes, they kind of get the double dip because they might be very focused on paying for that business traveler, which is a subset, many of the people who travel for personal things are also business decision-makers. And so you get both.
So it is not a simple pricing discussion. It usually has a lot to do with the scale that you're going for, how many airports you're going for, how deep within those airports you want to get. There's a lot of factors that go into it beyond just the passenger counts and just the mix of personal versus business. But those trends are definitely helping support the great performance we're seeing in Airports. I hope that answers your question at least a little bit.
Yes. That's good. It's good to get some thinking about it in there. I was wondering, too, if there are any potential airports up for bid that might be available and of interest to you? And also, sort of maybe on a related note, does the duration of the contracts influence your CapEx decisions and strategies in those areas?
Yes. Dave, do you want to take the CapEx -- well, you could talk about the bid too, you've got visibility of that.
Yes, no. I mean from -- yes, I mean, if it's a longer-term contract, yes, that will definitely go into it just because you -- gives you a longer chance to kind of monetize those assets, so -- and if you're doing a 10-year deal. And it also depends the size of the airport, the available inventory. But on average, you're probably get a little more CapEx on a longer-term deal than you're going to say it's 5 years.
As far as contracts that are coming up, I mean, when you look at the airports across the U.S., I mean, there's airports coming up all the time. So we actively pursue -- we'll look at each individual airport. Does it make sense to fit into our portfolio? Do we think it hits the strategy of what we're trying to accomplish within our Airports division? And we're definitely going to look at them. And the ones that make sense, we're obviously going to move forward. And there's airports that we feel don't fit exactly into our portfolio and we would pass on them. But we're constantly evaluating them as they come out.
But there's nothing material in the next 12 months in terms of renewals that we're facing.
And I think one of the interesting things, we don't talk about this a lot, but as our airport results have been going up, our airport count has actually gone down, because we've been focusing on airports where we have greater network effect, airports where we have the ability to have roadside sales along with them, things along those lines. So we have been evolving the footprint of airports over the last the last several years and really trying to focus that capital on the places where we think there is the strongest return perspective.
Okay. And maybe one final one. You called out San Francisco in particular as one of those markets, not necessarily for airports, but just in general, that has had some challenges. I'm wondering if you look at that and some of the other markets around the country that have been under pressure. Is there a rebound potential in those markets that might have the possibility of lifting some of your domestic billboard revenue and rates of growth?
Yes, Jim, that's -- it's a good question. I think as you think about -- I don't think there's like a post-COVID snapback sort of scenario that you're going to see that's going to cause our numbers to just take off. I think if that were to happen, that would be because of success we're having in some of the verticals that we're working or because the advertisers evolve their behavior, which can and does happen. I don't think it's necessarily just on the back of a regional snap back.
But I do think, just like throughout 2023, some regional challenges or headwinds for us, they could very easily become tailwinds for us if the commercial environment in those markets gets better, and if some of the underlying challenges get addressed, which I actually think they are, particularly in Northern California. I think that you are seeing some political will being exerted and some behavior to try to drive some change in some of the dynamics that have dragged those markets down.
And being a longtime bull on California, I would not bet against our friends rebounding those markets. So -- but I don't think it's going to cause us to suddenly double our guides or anything like that. It's just not that -- it's part of a much bigger portfolio.
All right. And Brian, wish you well in this transition. You've been through a lot over the past 20 years. So congratulations on the success.
Thank you, Jim. Appreciate it.
We reached the end of our question-and-answer session. I'd like to turn the floor back over to Scott Wells for any further closing comments.
Thanks, Kevin. I appreciate it. Just on Jim's last point, the thing that I would just point to, we are a company that have our challenges on our balance sheet and we have our challenges where site lease goes up or things like that from time to time.
But we are a company that is driven to excel and that does things right. And I view this transition from Brian to David as just a great leading indicator for everyone of our ability to manage multiple complex things at the same time. These 2 guys have done just a phenomenal job of collaborating and making the transition for the team go really, really well.
And I want to call that to our investors' attention because it is important that our financial operations are seamless. We wouldn't be able to be going to market like we are right now if we had a choppy, crazy transition going on. The fact that we were able to do this smoothly and still be in the marketplace and still be operating is a testament to the culture and the behavior of the company. So I just thought it was important to call that out.
And I thank you all for your interest, and look forward to updating you as we have more information as 2024 builds.
Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.