Ladies and gentlemen, thank you for standing by. Welcome to iHeartMedia, Inc.'s Third Quarter 2014 Earnings Conference Call. [Operator Instructions] And as a reminder, today's call is being recorded..

I'll turn the conference over to your host, Effie Epstein, Vice President of Investor Relations. Please go ahead. .

Good morning, and thank you for joining our 2014 Third Quarter Earnings Call. On the call today are Rich Bressler, President and Chief Financial Officer; and Brian Coleman, Senior Vice President and Treasurer..

We'll provide an overview of the third quarter 2014 financial and operating performances of iHeartMedia, Inc., iHeartCommunications and Clear Channel Outdoor Holdings..

For purposes of this call, when we describe the financial and operating performance of iHeartMedia, Inc., that also describes the performance of its subsidiary, iHeartCommunications. After an introduction and a review of the quarter, we'll open up the line for questions..

Before we begin, I'd like to remind everyone that this conference call may include forward-looking statements that involve uncertainties and risks. There can be no assurance that management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations..

Please see our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission for a discussion of important factors that could affect our actual result..

Pacing data will also be mentioned during the call. For those of you not familiar with pacing data, it reflects revenues booked at a specific date versus the comparable date in the prior period and may or may not reflect the actual revenue growth rate at the end of the period..

During today's call, we will provide certain performance measures that do not conform to generally accepted accounting principles.

We provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press releases and a slide presentation, which can be found on the Investors section of our website, iheartmedia.com and clearchanneloutdoor.com..

Please note that our 2 earnings releases and the slide presentation provide a detailed breakdown of foreign exchange and noncash compensation expense items, as well as segment revenues and OIBDAN..

With that, I will now turn the call over to Rich Bressler. .

Thanks, Effie, and good morning, everybody. Once again, as Effie mentioned, you can find our prepared slides on our website..

This is our first earnings call as iHeartMedia, Inc., and I'm very excited about the opportunities this change gives us..

Let me quickly remind you that EC Media Holdings is now iHeartMedia, Inc. Our former media and entertainment division is now iHeartMedia and there is no change in the name of our Outdoor business. .

Let me spend a couple of minutes sharing our thinking behind becoming iHeartMedia. This change let us capitalize on the powerful iHeartRadio brand that we've built in just 4 short years. A brand that already has achieved over 70% brand awareness.

iHeartMedia could play a focus on our powerful local and national brands and industry-leading platforms, including broadcast radio, digital, events, outdoor, mobile and social..

Our new name better reflects this scale, impact and reach, and looks to our future and not our past.

It's now easier than ever for our advertisers and other partners to take full advantage of the range of content, audiences and experiences we deliver across multiple platforms in cars, on stages and everywhere consumers want to find information and be entertained..

With advertisers, the name alone opens doors and doesn't peg us at any one platform, including broadcast or outdoor media..

Ultimately, our whole company is focused on becoming the #1 multi-platform media company in revenue and earnings, in addition to already being #1 in reach in the United States. So this is an exciting opportunity to monetize our assets better and get our fair share of advertising spend..

As you know, there was no name change for Outdoor. Clear Channel Outdoor is a strong and globally recognized customer-facing brand in all the countries in which it operates. And Clear Channel is the brand that Outdoor customers know best.

Clear Channel Outdoor is built into the fabric of our multi-platform company and remains a critical and core part of our business. We've invested heavily in our Outdoor brand and infrastructure and continue to be very bullish about the Outdoor industry.

We are uniquely positioned to offer multi-platform solutions to advertisers by integrating Outdoor with radio, digital, events and our other platforms..

The feedback on becoming iHeartMedia has been very positive from the advertising community. On our fourth annual iHeartRadio Music Festival, we hosted our first ever Client Summit, where we invited hundreds of advertisers and agencies to hear about the new iHeartMedia. Even at 9:00 a.m.

on a Saturday morning in Vegas, there was a great buzz in the room as our teams spoke about the immense power of our assets and the truly unique opportunities that our multi-platforms offer our advertising partners..

The advertising world is moving to buying ROI, return on investment, not ratings or impressions as it does today. And we stand to greatly benefit from this trend since we provide huge ROI, reflecting our audience size, our scale and the impact we have, none of which have been fully monetized..

We also believe Outdoor's significantly undervalued and this move to ROI will greatly benefit Outdoor as well..

Now let me share some thoughts on the quarter before diving into the business segments. We continue to make great progress in key areas of the company. At iHeartMedia, we had strong growth in our national advertising business as well as events.

Americas Outdoor continued to improve after coming off a challenging first half of the year with revenues down slightly year-over-year. And our International Outdoor business continues to deliver through both organic growth and new contracts..

Earlier this month, we announced the partnership with Omnicom Media Group. Our agreement provides a wealth of innovative opportunities for OMG's clients.

They will be able to develop more effective creative media campaigns that utilize iHeartMedia's cutting-edge multi-platform content and data, allowing advertisers to better maximize and leverage campaign spending and marketing plans across our broadcast platforms, our digital properties, as well as our 20,000 annual live events..

our size and our reach, including broadcast radio, digital, mobile, social, outdoor and events..

Now turning to Slide #4. As we've discussed on our last couple of earnings calls, financial discipline and tight expense management are key priorities for us, and we have delivered. Looking at Slide 4, our results today highlight these efforts, both from a financial perspective and in terms of our business decisions.

Our revenue's up 3% year-over-year and our OIBDAN rose 9% on a consolidated level.

When looking at our business segments and excluding spending on our revenue and efficiency initiatives from this quarter and the third quarter of 2013, as well as certain litigation expenses, our OIBDAN was up year-over-year in every business segment for the first time in 2 years..

At iHeartMedia, we grew revenues in a market that continues to be soft across radio and political, while continuing to tightly manage expenses..

At International Outdoor, some of the new contracts, as we promised last quarter, continue to ramp up and drive revenues and OIBDAN. These include our airport contracts in Rome and our digital malls expansion in France. At Americas Outdoor, we've made a lot of progress this year despite headwinds on the national front, the loss of the L.A.

digital board and continued softness in the market. I'll expand on those points a little later..

Before turning to our business highlights in Slide 5 and 6, let me mention we have about $18 million of costs related to revenue and strategic efficiencies this quarter, the same level as in Q3 2013.

You can expect to see these types of costs again in the fourth quarter as we continue to invest in these initiatives, but we are already beginning to realize the benefits. Again, on a consolidated basis, our revenue grew 3% and our OIBDAN was up 9%..

Now onto our highlights. Starting with Slide 5. At iHeartMedia, we hosted our fourth annual iHeartRadio Music Festival last month. We doubled our social impressions from last year reaching over 5 billion, which is on par with the Academy Awards and more than twice the size of the Halftime Show of the Super Bowl.

We also continued to drive strong engagement with Millennials with over 80% of the social media posts related to the festival coming from the 18- to 35-year-old demographic..

From a content perspective, we, of course, air the concerts live on our broadcast stations and stream them on the iHeartRadio app, both mobile and PC, as well as continue to leverage our partnerships with Yahoo! and The CW Network..

Yahoo! streamed the concert online via their live stream, and The CW Network aired the concert as part of a 2-night TV special. The iHeartRadio Music Festival is the perfect example of our multi-platform company at work..

We also just announced our inaugural iHeartRadio Fiesta Latina, a first of its kind mega concert event for Latin music fans nationwide, featuring Pitbull and Ricky Martin, among many other top names in the Latin music community, performing live at L.A.'s Forum on Saturday, November 22..

We also released the lineups of the annual iHeart Jingle Ball tour taking place in 13 cities. Taylor Swift, Maroon 5, Sam Smith and other top artists will lead the all-star lineups in New York, Los Angeles, Miami, Boston, Chicago and other major cities.

These events are great opportunities to continue developing our strong relationship with the artist. Just last night, we hosted a unique Secret Session with Taylor Swift for her new album, 1989, which included an amazing performance, broadcast across our radio stations nationwide through iHeartRadio and streamed live on Yahoo! Live..

We're pleased that our events business keeps growing, enabling us to reach new audience segments, as well as provide innovative tentpole opportunities for advertisers across a variety of categories to connect with their consumers..

When I look at our 2014 events roster and sponsorships, we had both first-time sponsors and returning sponsors to support our events, which really speaks to the national platform we built in a relatively short period of time.

For example, Macy's, State Farm, MasterCard and Pepsi are all returning advertisers, who each sponsored one or more events this year and last. We've also brought first-time event sponsors to our platform across a variety of categories.

Auto with Ford Motor Company, quick-service restaurants with Taco Bell, spirits with Jim Beam bourbon and telecom with Sprint, just to name a few. Our national sales group continues to execute on unique custom solutions that provide unmatched consumer engagement, using our events business to power new growth..

The iHeartRadio app also continues to grow across registered users and total listening hours or TLH. As of September 30, we reached 56 million iHeartRadio registered users, growing 43% year-over-year. Our TLH was up 10% over the third quarter of 2013.

I cannot emphasize enough that we continue to use the power of broadcast to build and drive the growth of the iHeartRadio platform and brand. And that iHeartRadio reached the 50 million register user milestone, faster than Facebook, Twitter and Pinterest and faster than any digital music service..

We also continue to focus on expanding the distribution of the iHeartRadio platform everywhere our listeners are, whether in or out of home.

We recently became the first new music partner for Android Wear, enabling users who have the iHeartRadio app installed on their Android smartphones to control their iHeartRadio listening experience on their wearable with voice activation.

iHeartRadio is now available through the Internet and iHeartRadio app on more than 35 platforms, including mobile, tablets, automotive partners, smart TVs, gaming devices and more..

Before moving to Outdoor, I want to take a second to talk about our local broadcast radio business. Our tremendous reach and influence with consumers is built on this strong foundation of our local radio station brand and franchises. At our stations, we have built strong local teams with incredible depth of management.

We are excited about the innovation and creativity that are coming up of our individual markets at all levels, from the market President to the sales and programming teams, account executives and especially from our on-air talent.

With our talent, we have also put a strong emphasis on expanding opportunities for on-air personalities across the company over the past 12 months.

From our national stars like Ryan Seacrest, Elvis Duran, Bobby Bones, Breakfast Club, Steve Harvey, Angie Martinez and many other well-known established names, as well as developing many up-and-coming names that you'll be hearing about in the future..

Moving onto Outdoor on Slide 6. We continue to grow our digital presence with over 1,100 digital billboards in North America and over 4,200 digital displays internationally. In International Outdoor, we launched Play London, a digital outdoor expansion initiative in the U.K.

Play London will feature the nationwide expansion of storm, our network of premium digital boards, and Adshel Live, our network of bus-stop panels. Hundreds of digital sites for premium city-center locations will go live across the country by the end of 2014..

Next, I will spend a few minutes to review our segment results and then we'll wrap up with liquidity before opening the line for questions. Starting with iHeartMedia on Slide 7, revenues -- revenue grew up year-over-year despite another soft quarter on an industry level.

According to Miller Kaplan, the overall radio industry was down during July, August and September, driven by weakness and [indiscernible]. We significantly outperformed the market and grew our overall radio business year-over-year, driven by growth in national, as well as our network business, which includes traffic and weather.

The growth is partially offset by a weakness in our local core radio revenues, although we did outperform the market in local as well in July, August and September..

Among the quarter's top categories were auto, financial services and homebuilding. We think that part of the reason of it is over delivery is because of this -- of the success we're having in bringing new revenue to the sector from advertisers who have not historically spent with us or in radio.

This reinforces my earlier point that advertises are moving to buy ROI, return on investment. And as I've said before, we stand to benefit from this trend..

We also saw some benefit from political, which I'll go into more detail on Slide 10. But let me talk about our overall trends there before moving onto iHeartMedia expenses [indiscernible]. Political has been softer than expected this year, driven by the lack of competitive races in the larger states.

The closest races are taking place in smaller markets, such as Kentucky, Colorado and Iowa. There's no doubt that the lack of competitive races in the bigger markets is the most significant factor in the political softness for us.

One thing worth mentioning, however, is that historically, we've been most successful in selling talk and news to political advertises. With our launch of audio earlier this year, we've been more successful in selling music stations to political campaigns, a trend that we'll work to extend to the future political years..

Now to expenses. Over the last few quarters, I spent a lot of time telling you how about our focus on tight expense management and our results reflect these efforts.

iHeartMedia expenses are down for the second quarter in a row when excluding spending on revenue efficiency initiatives totaling $5.4 million in this quarter compared to just $3 million last year. On a reported basis, expenses are essentially flat.

We are committed to growing the top line tightly managing expenses to drive more revenue to the bottom line. And that is how we're going to continue to run this company..

When adjusting for our spending on revenue and efficiency initiatives, OIBDAN is up almost 2% or up over 1% on a reported basis. While we continue to invest in strategic revenue initiatives through the remainder of the year, we expect to continue to see margin expansion in the fourth quarter..

Let me cover our fourth quarter pacings before turning to Americas Outdoor. Fourth quarter pacings through the end of last week at iHeartMedia are up 1.3% with core stations up 0.3%. As you've heard me say before, these pacings are just a snapshot in time and certainly don't include everything we do as a company..

Moving on to Americas Outdoor on Slide 8. Our revenue and expenses are essentially flat when excluding the impact of foreign exchange. On a reported basis, revenues and expenses reached down about 0.5%.

Please note that our expenses in the quarter also included $4.1 million in litigation expenses related to billboard permit disputes, up $1.8 million year-over-year. OIBDAN was up about 0.5% in the third quarter excluding these expenses..

As a reminder, on a reported basis, Americas Outdoor was down 6% in the first quarter and down 5% in the second quarter compared to down only 1% in the third quarter. We continue to make meaningful progress improving the business and this is evidence we are getting Americas Outdoor back on track.

Naturally, as I've told you on our last couple of calls, some large accounts pulled back on their Outdoor spending earlier this year. Even though we've had some traction on getting spending back from these accounts, we still had an overhang in this quarter's results because a meaningful portion of our business is booked on the long-term basis.

Additionally, there's been continued softness in the national market..

Last year, we saw a larger number of product launches across telecom and tech, and those dollars just haven't been there this year to the same extent.

Our local and regional businesses remain strong, and we continue to grow our digital presence, which better serves advertises as they increasingly seek more immediacy, flexibility and real-time marketing capabilities. From an organizational perspective, we are well underway in our search to hire a CEO of Americas Outdoor.

In the meantime, we have set up an office of the President, which is comprised of 3 seasoned Outdoor executives with the experience across sales and operations, and they report directly to the CEO of Clear Channel Outdoor, William Eccleshare..

As for our pacings again, they just reflect one point in time. Fourth quarter pacings are currently down 1.5%. Let me share that we have seen our overall improvement in fourth quarter pacings. In early August, our fourth quarter pacings were down over 5%. In early October, they were down only 2%.

And as I just mentioned, today, fourth quarter pacings is down only 1.5%. Our local business is pacing up, but that is offset by some weakness in national..

Turning to Slide 9. Our international team continues to deliver with revenues up 6% or up 5% excluding the impact of foreign exchange.

Consistent with the first half of the year, Western Europe was a big driver for us with our new contracts from earlier this year continuing to ramp up, particularly with the Rome airports contract and the new digital mall contract in France. Sweden also continued to experience strong organic growth in the quarter.

Revenues in emerging markets also increased, driven by new [indiscernible] contracts in China. Expenses were up 4% on both the reported basis and when excluding the impact of foreign exchange. As we spoke about last quarter, huge contracts drive expenses in the short-term, but become significant OIBDAN contributors in the longer term..

We have already -- we are already seeing the positive impact from new contracts launched earlier this year ramping up. OIBDAN growth was up 14% in the quarter, excluding foreign exchange, were up 13% on a reported basis.

We continue to be excited about the foreign mix of our International Outdoor assets, and the growth opportunity from a strategic and financial perspective. Fourth quarter pacings for International Outdoor are up 2%..

On Slide 10, we show some of the items that affect the year-over-year comparability. First in revenues, I spent some time earlier talking about the softness in new political landscape. Even so, we had nearly $20 million of political spend in the quarter on a consolidated level.

As you know, political spend is a key revenue driver for Katz, our media representation business that is included in our other segment..

Of our $20 million in revenue from political, $7 million was for Katz. I'd also like to note that this quarter included approximately $12 million of revenue related to an early termination fee related to the termination of a representation contract.

This is essentially a prepayment on revenue we expect in future periods totaling approximately $2 million per quarter. On the expense side, we had approximately $18 million of costs related to strategic revenue and efficiency initiatives this quarter. As I mentioned earlier, about $5.5 million of these costs were in iHeartMedia.

We anticipate funding new strategic revenue efficiency initiatives over the rest of the year as I've already told you, we continue to tightly manage our expenses, seize new efficiencies and drive more revenue dollars to the bottom line..

Turning to Slide 11. We reduced our capital expenditures by $11 million or 17% to $54 million this quarter, mainly driven by a capital reduction at iHeartMedia, which is down almost $13 million. This is yet another indication of our commitment to tightly expense management and financial discipline.

Of that $54 million, approximately $43 million was invested in Outdoor. We spent $19 million in our Americas segment, related mainly to the construction of new digital displays and $23 million in our international segment used primarily for new digital billboards and street furniture and renewals of existing contract.

Our CapEx [indiscernible] for the year remains unchanged at $300 million for iHeartMedia, Inc..

Moving to debt on Slide 12. We are staying focused on maximizing the value of our business by continuing to provide capital structure and liquidity through capital markets and strategic transactions. As of September 30, iHeartMedia, Inc.'s debt net of cash totaled approximately $20 billion.

During the quarter, we paid off approximately $222 million of our long-term debt through the issuance in sale of notes due 2021 to an iHeartCommunications Inc. subsidiary. We also raised $1 billion of priority guarantee notes due 2022 and prepaid approximately $975 million of our Term Loan B outstanding and $16 million of our Term Loan C outstanding. .

Recently, we were back in the market and we purchased $57.1 million of 2016 junior debt at a discount, further helping us manage our interest expenses in the near term..

Remaining in 2016, we have approximately $900 million in senior debt, which we believe we can be opportunistic in refinancing, as well as some legacy notes. As you know, that's quite a change from where we were 18 months ago and we're very proud of this.

We now have a clear runway to 2018 and can focus on growing the top and bottom line across our business segments..

Let me also note that you'll see on our income statement that interest expenses reported to be down year-over-year. Our refinancing transactions have resulted in the elimination of some of the purchase accounting adjustments recorded back in 2008, so noncash discount amortization interest expenses is now lower.

Our cash interest expense is up year-over-year. As you would expect, our weighted average cost of debt is slightly up to 8.1% as of September 30 compared to 7.6% as of December 31, 2013..

Let's look to turn to our balance sheet information and the debt ratios on Slide 13. iHeartMedia, Inc.'s cash on the balance sheet totaled $522 million at September 30. Our secured leverage ratio was 6.4x.

Clear Channel Outdoor ended the quarter with $204 million in cash, with its senior leverage ratio of 3.6x and its consolidated leverage ratio of 6.4x. .

We, of course, have a number of leverage available to us to enhance future liquidity if necessary, although we do have some added flexibility considering the financing -- refinancing transactions I spoke about on the last slide. As we have said before, we are constantly and aggressively evaluating our businesses and asset portfolios.

As we have demonstrated through our ARN divestiture, the sale of our nonconsolidated Hong Kong Outdoor business and the sale of other noncore assets, like our XM Sirius interest. We always look for the best ways to optimize our assets.

We are in the process of selling 2 of our buildings in San Antonio and we expect sales proceeds of approximately $30 million from those 2 buildings sales. Although we will lease these properties back earning per incremental rent expense, this is an efficient way for us to enhance our liquidity position. .

At the same time, we keep improving our operations and reduce our working capital needs in various initiatives we launched earlier this year at iHeartMedia, including centralizing collections across our local stations and tracking our weather businesses, as well as ramping up our efforts on collecting balances over 90-days-old, and standardizing our policies around the accounts payable.

We have seen some promising early results, and we expect these initiatives will continue to bear fruit through the rest of 2014 and beyond..

We remain comfortable with our maturity schedules in the near term, and we'll continue to take a disciplined and proactive steps to address our capital structures and liquidity. Most important, we're confident that our strategic revenue and efficiency initiatives will [indiscernible] our future organic performance. .

I'll close by saying that we're very pleased with our strong growth in OIBDAN this quarter. Fueled by top line growth and tight expense management. We continue to build momentum across our businesses, developing long-term relationship with major advertisers and agencies like OMG, and creating new revenue opportunities.

As I mentioned earlier, this is the first time in 2 years that we grew our OIBDAN in all our business segments on an adjusted basis, when excluding spending our revenue and efficiency initiatives and certain litigation.

We're confident in our strategy to becoming the #1 multi-platform media company in revenues and earnings, in addition to our industry-leading reach. .

Now let's open the line up for questions. .

[Operator Instructions] First question comes from Jason Kim. .

First on margins. Directionally speaking, how should investors think about your ability to hit margin expansion in 2015, that's with the media segments. I know it's not a political year next year and you continue to invest in the business to grow.

But in terms of incremental spending levels, what's your comfort level and being able to the increase margins for the business in 2015?.

This is Rich. Thanks for the question. Comfortable, in one word. We expect to see margin expansion in the fourth quarter this year. I expect to see margin expansion in 2015. I think when you go back to the first, second quarter this year, I talked about you starting to expenses level out, you saw that.

In iHeartMedia in this quarter, actually when you factor out the onetime items -- just as a reminder of what I just said a few minutes ago. Expenses are actually slightly down. So you see margin expansion and really is just a way of life around here.

It's just we're constantly -- we're going through our 2015 budget as we speak, and we're constantly looking at getting efficiencies at the organization, flattening the organization where it's appropriate. I think we've taken a lot of steps to do that. And we'll continue to challenge ourselves how to bring more money down to the bottom line. .

Any update on the L.A.

digital board situation that you could provide for us?.

No, no real update. I mean, there's not much news on L.A. with respect to our 77 -- just to remind you, our 77 digital billboards. We're continuing to work vigorously, closely, productively with the city on a legislative solution that will allow us to turn back on as many build -- digital billboards as possible. As soon as possible.

Believe me, nobody wants those boards on more than Bob, myself, William and the rest of the team. As I've said before, this process does take time and I never put a timeframe on it. Back when I first started having these calls I won't now.

What we're trying to do in the interim is selectively seek permits to cover some of the Board's back to traditional vinyl, static signs. We converted 2 boards in the second quarter. Back to static signs, we converted 5 boards, I think, it was in the third quarter back to static signs.

So again, this is just based on the numbers, it's not meaningful from a revenue perspective, but it's a good parallel step. We got to keep our feet moving, that we can take while we work through the legislative process. .

Okay. And if I can ask one more on the balance sheet side of things. You guys have included in a lot of -- on the liability management side of things this year, but the nature of the market is always thinking about what's next for the company.

So how do you feel about the liquidity of portfolio the company right now? And thoughts about the remaining 2016 maturity. And should we be thinking that your order of priority still remains 2016 maturity first.

Or do you feel like the amount of that coming due in '16 is manageable enough for you to start considering buying back even some of the -- accommodate -- 2018 maturities in the open market that are trading piece-only below par?.

Jason, let me just start that. I'm going to turn it over to Brian whose with me right here. Let me just highlight on -- there's obviously 2 sides on the balance sheet or a bunch of sides. But -- first, just on asset sales. We're obviously noncore asset sales. We're continuing to look at our business asset portfolios and optimize that.

We indicated that the last couple of quarters, and now this quarter, what we talked about the sale of our buildings in San Antonio. We expressed the proceeds to be approximately $30 million and we'll lease those back.

So again, similar to what I talked about earlier in the expense management, similar to capital expenditures, which we saw on a year-over-year basis, we were down in capital expenditures particularly at iHeartMedia -- I mean up slightly on the Outdoor business, which are revenue-producing assets. .

So again, that's really continues to be a way of life on the asset -- non-core asset side. I'll turn over to Brian for the balance sheet liability management. .

Sure. We were out in the market and we repurchased $57.1 million of the 2016 note. I think that's a good indication of how the company uses its liquidity position. We feel pretty comfortable about where we are and the things that we can do. There was some market volatility, maybe even dislocation over the past couple weeks.

We were optimistic, we bought back debt at a discount. I will point out that we repurchased 2016 indebtedness. We did not purchase any 2018 indebtedness. So when we think about focus, I think we'll continue to be opportunistic. Although the markets aren't today what they were the past couple of weeks.

We'll focus on 2016, we will look to refinance the remaining term loans that are now below $1 billion. And we'll always look to be opportunistic. But again, I would kind of take a look at the actions we've taken and take that as an indication of our comfort level with respect to our liquidity position. .

[Operator Instructions] And the next question comes from Lance Vitanza. .

I wanted to start with the Omnicom partnership.

Could you tell me, does this reflect the shift in strategy amongst advertisers? Or was this a more of a competitive victory? In others words, did you take business away from another radio company or is this money coming in from some other media?.

So a couple of things. So look, we have a long-standing relationship with Omnicom. As quite frankly, we did with Horizon when we signed that deal early this year.

The way to think about it, is that it underscores that the major agencies -- major advertising agencies are these 2 are first and clients continue to really appreciate our multi-platform assets. What we're doing, what we're delivering on, what we're achieving, the way we work major advertisers.

And what this enables us to do is to build unique programs to address the advertiser's individual needs, the results we deliver and really gives them a unique partnership -- really gives them a unique partnership with us. From a financial perspective, neither the deals are all incremental. But we serve these agencies.

As I said for a long period of time. What's important here is really the innovation for their clients, and again, an indicator of our ability to deliver dynamic marketing solutions. And as I mentioned also in my opening remarks, look, everything is going to move to ROI. That's what it's going to be about it.

It's going about dollars that get put out the door by advertisers and companies, and then therefore, the return that we, as in the media, can all deliver back to them. We've talked about the results before that -- Nielsen came out with this study that on average. We are 6:1 dollars in versus dollars out.

So we think we stand to benefit greatly as the world goes to ROI and we expect our Outdoor business to benefit greatly also. .

Just one other question. About a week before -- on the iHeart segment side, about a week before the quarter ended when you were marketing your bond deal, you provided pacings that were plus-3, if I remember correctly, or close to plus-3. You came in at around plus-1.

Can you explain the variance there for us?.

Sure. Well, which I'll just have to say this, but you know, I say this every quarter. I hate giving out pacings and that's why I hate giving out pacings because it's just a reminder that pacings, at a period of time -- let me give you a couple of things though on that, having said that. First of all, the industry was overall weak in the third quarter.

We significantly outperformed the market based on Miller Kaplan. And September was weaker than August. The political dollars came in a bit softer, quite frankly, than we expected, which I mentioned in my opening remarks. Plus we also had some timing issues with Jingle Ball and the festival.

And now you see I reiterated that pacings, I think, as we're sitting here today, 1.3%, so we've improved since we closed out the quarter. .

And our next question comes from the line of Avi Steiner. .

I know you hate point in time, so I want to approach at least the comments around Q4 in the media and Entertainment segment by asking is there any tough comps we should be aware of or anything else, potentially weighing on the segment as we think about the fourth quarter this year?.

No. There's nothing overall in particular that comes to mind. The one thing that I -- the only thing that general comment I would give you is picking up on the last question and the fact that we're up 1.3% today, and we continue to significantly outperform the sector.

I think you're seeing real evidence, not just in the advertising agency deals that I mentioned earlier. But just on our revenue and their bottom line performance, I really start to really start to bring money to this sector. Bring money to the sector that has not come to the radio industry before.

And again, based on all the data, based on the ROI data we have, based on the case studies we have with lots of big advertises, like Discovery Network, which advertised with us and we made Shark Week #1 across all the mediums in that week. It's things like that, as we build out the momentum I think you're going to see continued improvement.

But nothing in particular on the comp basis. .

Okay. And then second, turn to International Outdoor for a second. You've had some nice revenue growth, some new business wins you've highlighted.

When do we see the bottom line flow through there? I know there's a timing issue, but if you can help us out there?.

So we've had several -- maybe you and I have a little different definition of really good performance on the bottom line. I think we were up 14% this quarter on a reported basis. 15% on FX neutral basis overall in the quarter, so I think we're really starting to see the bottom line expansion we had. We've had margin expansion the last couple quarters.

The increase that we've had, we've -- yes, I mentioned before we have had some increase in the expense cause of some airport contracts in Rome, some digital mall contracts in France. We've had some new contracts in Sweden.

But if you look at the top line, as we talked about earlier in the year, these are countries and managements that have delivered every time we've allocated capital to them with margin expansion and with bottom line growth.

And at least I for one would argue that 14% increase on a reported basis in International Outdoor, 15% on apples-to-apples basis with foreign currency. I think that's pretty good margin expansion. Obviously, we could always do better. But I give William and his team great kudos for the job they've done outside the United States.

I put them up against any management team out there. .

Fair enough, and sorry for that. Balance sheet, for a couple of questions and I'll turn it over. The $5.5 million that you bought back, not a huge amount but I'm curious why you decided to keep that outstanding relative to, I guess, prior senior note purchases where I believe you retired them.

And then as a follow up to that one, if hypothetically you ended up buying significantly more, would the existing note condition be triggered if you held them and then retire those notes?.

On the first one, I think our typical practice is when we repurchase debt out of the restricted side, we actually keep it outstanding. There has been a couple of cases several years ago where they -- the seller required us to retire them. But typically, we don't in the unrestructured subsidiary. And so we were just following standard practice here.

The second question I want to think through a little bit, it's if we bought in these notes, can we accelerate the existing notes condition? Is that the question?.

Yes, if you got below the $500 million threshold, but kept those outstanding. .

You know, I don't think they're technically out. I think we repurchase them or we don't cancel them, they're not technically outstanding, so I do not believe that we would accelerate the existing note condition. I may want to check on that, but they're not technically outstanding. So I still think they count under the debt agreement.

One thing I'd point out is we would need to retire nearly all of the 2016s and repurchase nearly all of the 2016s and retire them in order to do that. .

Okay. Last question from me, can you remind us -- I guess based on last public disclosure and anything else you want to provide, what the sponsors own or control of your debt and while you've done a good job kind of selling assets and talked about couple other ones.

I'm wondering if there's -- in your capital management side, the working capital has been great and progressing. I'm wondering if there's a more holistic solution to the cap structure here.

And obviously, you may not want to share that with us, but I'm just wondering how you think about -- you've got a sort term stack, but longer term, how do you think about this balance sheet?.

I think I'm going to take it in reverse order, Avi, you're right. To the extent there's a more holistic, strategic solution. I'm sure there's a lot of people thinking about it because that's not something we can really talk to on an earnings call. I would say that.

Certainly the sponsors -- I'm thinking about all the things they can do, and I'm not privy to many of those conversations. But going into the first part of your question. Actually, would you repeat the first part of your question because I don't want to get it wrong. .

I just want to -- I think in different proxy statements, you've disclosed what the sponsors, certain investors make hold of your debt, and I want you to get... .

And I was going to respond that it's just in the proxy statement. I actually think we do update affiliate positions and some of our offering documents. So it's not something that we update on earnings calls or have special disclosure around.

But certainly, we do update in our annual proxy that's available, and I do believe we make reference to affiliate positions in some of our offering documents when we issue debt so I'd refer you back to those public documents for a response there, and I apologize for having you repeat the question. .

And we have a question from the line of Tracy Young. .

Yes, my question relates to the Americas. In the release, you mentioned that higher digital revenues were offset by decreases from traditional product lines. I assume that is partially related to the Logan Airport contract.

How are the static boards doing? And also, what should we assume for digital boards in terms of ramp-up for the year? Total boards. .

Thanks. I mean, for contract. That's relatively small, to be honest, in the overall scheme of things. The traditional front, again, we talked about national every quarter, and that's really driven by national being down. As I said, we're starting to see some improvement.

We obviously made changes in management, and I think right when we made those change, we started to see some improvement there and we talked a lot about that. Another reasons traditional is down is as you convert boards to digital, you lose inventory from those converter boards, and thereby, you're driving down the traditional revenue.

Just [indiscernible]. Our digitalize is up because of the new boards we had in 2013. We've got full year revenue from those new boards. We continue to build out our digital presence this year. Just as a reminder, year-to-date, we've added 57 digital boards across our markets in the U.S.

And as we, as I said up front, we're starting to talk and interact on the '15 budget, so we'll continue to look to add boards in '15 where it makes sense, where we can get the return on investment. That only when we can get the return on investment.

And as a run, but typically, we tend to add more boards in the fourth quarter of a year than we do in the other quarters. .

And our next question is from Marci Ryvicker. .

When can you lapse the Logan contract? Is that the beginning of next year?.

It came off of at the end of -- Marci it came off at the end of 2013, I believe. So yes, the beginning of next year. .

Okay. And then you mentioned for Clear Channel Outdoor Americas that a big percentage of your contracts are on a long-term basis. Can you talk about the average length of your contracts today maybe versus historically ? I feel like the contracts have shortened in length, but I just want to make sure I understood what your comment meant. .

I'm not going to -- I don't think this is going to surprise you. I'm not going to talk about the average length because it really does vary by product, excuse me, by advertiser, by product by category. I think the overall statement, which I've been talking about consistently the last 3 quarters is on average.

Yes, things have shortened up in the timeframe. So that I'll reiterate and confirm. But other than that, I'm not going to go into any detail. .

Okay. And then one last question. On the iHeart front, you talked about margin expansion in Q4 next year.

Is that all in or is excluding the investment spend?.

The -- it's going to be both. It's going to be -- I think if you include the investment spend year-over-year, you'll see margin expansion. But we really look -- but investment spend is going to be a little bit of a way of life here.

And again, when we look at investments spend, just to be 100% clear, we never attach and I never attach any residual value to it. So every investment spend is got to stand on its own on return on investment basis cash-on-cash. So it really be both ways with and without. .

And we have a question from David Miller. .

On the third quarter domestic Outdoor result, which was quite good, it was obviously above the pacing number that you issued 90 days ago. How much of that was due to lapping the Los Angeles digital situation on a comparison basis? And how much of it was taking share perhaps from CBS Outdoor? Any commentary would be great. And then I have a follow-up. .

Sure. Well, a couple of things. So L.A. came off -- just as a reminder, fully came off in the second quarter. I think this is the first time I've been in the job. I haven't been talking about. Look at L.A., or that it had lapsed full-time. And although L.A.

isn't -- with not having L.A., the other thing to remember is on digital national footprint of portfolio also. So it part was L.A. but part of not having it is also does quite frankly affects part of our overall national business that it's there.

And also, I'd say, we made a bunch of -- like I said, we've made a bunch of changes on Americas Outdoor within the top ranks of the organization. We're looking to hire a new CEO for America. But there's really not much else to comment on in terms of L.A. digital. .

Okay. And then just to follow-on the Los Angeles digital situation, I mean, at one point -- obviously, you're defacing some of the boards and you're putting up sort of vinyl boards in the places of those particular boards.

At what point do you sort of throw your hands up and just say, this isn't working, we're stuck in red tape and you just move to replace all the boards with vinyl? And then within that, we had heard some rumblings about some sort of court hearing that's going to take place in the situation in Q1? Could you confirm that?.

So a couple of things. First of all, let me say unequivocally, we never throw up our hands. So that would be an oxymoron if you know anything about Bob and I and the rest of the team. So we're never going to throw up our hands. Look, we put up 5 boards this quarter. Again, I acknowledge that's not meaningful.

But to the point about throwing up our hands, we're continuing to move the ball forward. I'm not going to comment on any specific court hearings or court dates because they get set up and I get frustrated as they get moved, they get delayed.

I start like looking to our people, thinking, "Gee, why can't we to do something about it?" But productively, again, I said this earlier, we are working with the municipalities on a legislative solution with this city that will allow us to turn as many digital billboards as possible and as consistent with the past.

I don't think I've ever given a date because to some extent, it's out of my -- not to some extent to a great extent, it's out of my control. This is a legislative process and I'm not going to give a date. .

There are no further questions in the queue at this time. I'll turn it back over to you. .

Thank you, everybody. Really appreciate spending the time and look forward to speaking to everybody in the future -- in the near future. .

Ladies and gentlemen, that concludes our conference. We'd like to thank you for participating and for using AT&T teleconference. You may now disconnect..