Welcome to the 2017 First Quarter Earnings Conference Call for iHeartMedia and Clear Channel Outdoor Holdings, Inc. [Operator Instructions]. And as a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, Eileen Mclaughlin, Vice President, Investor Relations. Please go ahead..

Good morning and thank you for joining our first quarter 2017 earnings call. On the call today are Rich Bressler, President, Chief Operating Officer and Chief Financial Officer; and Brian Coleman, Senior Vice President and Treasurer. We will provide an overview of the first quarter of 2017 financial and operating performances of iHeartMedia, Inc.

and its subsidiaries, iHeartMedia Capital I, LLC; iHeart Communications, Inc., Clear Channel Outdoor Holdings, Inc. and Clear Channel International BV.

For purposes of this call, when we describe the financial and operating performance of iHeartMedia Inc., it also describes the performance of its subsidiaries, iHeartMedia Capital I LLC, iHeart Communications, Inc. and Clear Channel Outdoor Holdings Inc. After an introduction and a review of the quarter, we will open up the line for questions.

Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements. These statements include management's expectations, beliefs and projections about performance and represents management's current beliefs.

There can be no assurance that management's expectations, beliefs or projections will be achieved and that actual results will not differ from expectations. Please review the statements of risks contained in our earnings press release and filings with the SEC. Pacing data will also be mentioned during the call.

For those of you not familiar with pacing data, it reflects orders 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 provide schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press releases and the earnings conference call 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 are available on our website, www.iheartmedia.com and www.clearchanneloutdoor.com and are integral to our earnings conference call.

They provide a detailed breakdown of foreign exchange and non-cash compensation expense items as well as segment revenues, operating income and OIBDAN, among other important information. For that reason, we ask that you view each slide as Rich comments on it.

Also, please note that the information provided on this call speaks only to management's views as of today, May 4 and may no longer be accurate at the time of replay. With that, I will now turn the call over to Rich Bressler..

Thank you, Eileen and good morning, everyone. Thanks for joining us. As a true multiplatform 21st century media and entertainment company, we're leveraging our leading broadcast radio, digital, outdoor, global, social, live events and data 2 businesses to continue to innovate for the benefit of our advertising and marketing partners.

In the first quarter, our consolidated revenues declined. However, adjusting for the sale of new outdoor U.S. markets and international businesses in addition to foreign exchange, our revenues increased, with all 3 segments driving growth. Operating income and OIBDAN were down.

At our iHeartMedia segment, this quarter marked the 16th consecutive quarter of year-over-year increases in revenue. We achieved that result in what is turning out to be a slower-than-expected ad market for traditional media companies.

We believe that our ability to generate this revenue growth was driven in large part by the investments we're making in innovations, including our digital and data products and platforms that strengthen our business.

Before expanding on our first quarter financial performance, I do want to highlight the strong fundamentals of our core businesses and several of our exciting new initiatives. As you know, based on reach, iHeartMedia is the #1 media company in the U.S., with a total of 0.25 billion consumers monthly.

In fact, only Google and Facebook, among all other media companies, have market reach of more than 200 million. It all starts with the scale and strength of our 850-plus broadcast radio stations. For nearly 50 years now, broadcast radio has maintained its reach of 93% of adults over 18, #1 among all media in the U.S.

Meanwhile, TV screens is headed downward, now at 87%. Among millennials, ages 18 to 34, radio reaches 92%, even surpassing smartphones at 91%, with TV lagging behind at 76%. And radio's reach among teens ages 12 to 17, is even higher at 95%, with live TV at 87% and Facebook at only 34%. Internet teens or generation years make up nearly 1/4 of the U.S.

population and can be tough to reach, the ability to connect with more than 9 out of 10 of them through radio is a huge opportunity for our advertisers.

The great appeal of radio to Generation Zs and millennials might come as a surprise for those who think that radio has all been declining and it certainly says a lot about the future of radio compared to other media platforms.

Beyond reach, iHeartMedia leads engagement with 31 minutes a day compared to 30 minutes for Facebook, 19 minutes for Google, 14 minutes for NBC and just 7 minutes for Snapchat adults 18 and over based on the data.

We believe that people spend more time listening to radio because they want the sense of community and companionship that it provides them.

The recent column in Media Post highlighted this point, reporting that millennials, even with their access to on-demand media, are still craving for more human touch derived from interacting with their local community.

Radio hosts help them feel even more connected and it feels special to them to know that others in their community are tuning into the same thing at the same time.

The ability of our industry-leading personalities to connect with their audiences over a vast array of platforms, from broadcast radio and digitally through iHeartRadio, to social media and events, allows us to create communities that build close personal relationships with our listeners.

Last month, we launched On The Move with Henrique Santos, our first ever major programming and marketing effort targeting the English language first Hispanic households. Not only does iHeartMedia's 91% monthly reach among the U.S. Hispanic population surpass any other U.S.

media company, but 43% of iHeartMedia Hispanic listeners live in English language first households. Last quarter, we celebrated Elvis Duran receiving his star on the legendary Hollywood Walk of Fame. The star honored his 2 decades on Z100 New York, where the Elvis Duran and the Morning Show rankes #1 in the market.

The program is also syndicated across nearly 80 radio stations, reaching over 10 million visitors monthly. And we're excited to announce that Elvis recently signed a new 5-year deal with us.

The Breakfast Club on New York's Power 105.1 and syndicated nationally saw their ratings grow 18% year-over-year in the quarter among adults 18 to 49, while the ratings of the Bobby Brown Show were up 21% among people 12 and over in the first quarter.

In LA, as you know, we have the #1 urban contemporary CHR rhythmic morning show with Big Boy's Neighborhood on Real 92.3 which is also syndicated nationwide. The Woody Show is the morning market leader in alternative rock at Alt 98.7 while Valentine's Morning Drive Show on 104.3 YFM ranks #1 among adults and females.

We recently re-signed Steve Harvey, who will continue in his role as host of the top-rated the Steve Harvey Morning Show which is syndicated nationally on nearly 100 radio stations and reaches nearly 7 million weekly listeners.

Last month, Delilah, whose evening show reaches more than 10 million monthly listeners across about 150 radio stations, was inducted into the National Association of Broadcasters Broadcasting Hall of Fame. This marked the first time a woman has been chosen for this honor in the past 35 years.

And Ryan Seacrest, whose On-air with Ryan Seacrest with LA's Kiss FM is syndicated to over 150 radio stations nationwide, is expanding his multiplatform presence with his return to TV on Live with Kelly and Ryan. It's clear that consumers love radio today, just as much as they did nearly half a century ago.

Thanks to our wide variety of talented personalities and programming available over multiple platforms such as broadcast, digital broadcast, people can finally connect with the personalities and content they want when they want to hear it. And we're making sure advertising agencies and brands know that and they'll have a bond with consumers.

For us, it's a simple equation. Radio does incredibly well among consumers, accounting for about 20% of all media consumption, but radio only attracts 6% to 8% of advertising dollars. We continue to believe there's tremendous untapped value here.

Radio is being undermonetized, given its reach and engagement across all audiences, including the tough to to target millennials and Gen Z'ers. Indeed, the major focus of our efforts is to close that gap. We have the unique ability to offer a suite of advertising solutions and tightly integrated multiplatform campaigns to advertisers.

These solutions provide an access to national scale and reach that we believe is unmatched by any other media outlet in the U.S. The top our marketing partners take full advantage of these growing opportunities, we continue to innovate in the programmatic and data space, recently introducing SmartAudio ad products.

At our SoundBoard event for brands and agencies in March, we launched SmartAudio, the latest speech of sound point of groundbreaking programmatic solution. SmartAudio combines the massive scale of our broadcast radio reach with the power of digital data and more informed audience targeting that advertisers expect.

So now brands can buy broadcast radio from iHeartMedia the same way they buy digital media. With SmartAudio, iHeartMedia can now utilize this digital data with more than 100 million registered on the iHeartMedia radio app and 100 million registered on the iHeartMedia broadcast radio station websites to create robust audience segment profiles.

Additionally, we introduced SmartAudio dynamic creative capabilities so clients can leverage the power of live broadcast media through a different creative based on real-time triggers like weather or sports teams.

By utilizing the iHeartMedia SmartAudio capabilities, brands will receive the massive scale of broadcast radio and the targetability and real-time adaptability of digital media.

Our Outdoor business is one of the largest outdoor advertising companies and we have over 600,000 displays in 35 countries across 5 continents, including 43 of the 50 largest U.S. markets.

In the first quarter, we continued to deliver on our Outdoor strategic initiatives by investing in our industry-leading data reach analytics capabilities and automated ad buying solutions, building out our digital networks in winning in radio and contract for the benefit of our marketing partners.

It's been 1 year since we launched RADAR, Americas Outdoor's data analytics tools for ad campaign planning, measurement and attribution. Although still early in the process, RADAR is already delivering for brands.

RADAR customers, including auto, quick service restaurants, retail and cable TV, among others, are seeing in-store visits or tune in climb by 15% to 30%. Additionally, some of these brands are choosing to complement their out of home RADAR campaigns with our mobile retargeting solutions that reinforce the outcomes of our advertising products.

Americas Outdoor's first to market private marketplace programmatic solution which launched late in the quarter, includes Digital Billboard inventory that reaches over 60 million adults a month. It also reaches 18 million adults monthly in our airports, including in 3 of the U.S.'s top 5 busiest airports.

In April, we introduced Europe's first out-of-home automated ad buying tool in the U.K., 3 months after its successful launch in Belgium. Now, our U.K. customers can access and buy audience base packages on an automated guarantee basis through Storm, International Outdoor's premium digital outdoor network in the U.K.

At the same time, we continued our global expansion of our digital out-of-home platform, including winning new contracts in the U.S. and Europe. Given all of these opportunities, we continue to invest in innovation to empower the business as a true, multiplatform 21st century company.

Given their sustained leadership in mass market reach, Radio and Outdoor remain undermonetized. That's why we continue to develop the right tools to enhance the abilities of advertisers, agencies and brands to reach their targeted audiences, enabling them to take full advantage of the opportunities our platforms offer them.

Now let's turn to Slide 4 and review our key financial highlights. Before we get started, I want to remind you that as part of our GAAP results discussion, I'll also talk about results adjusting for foreign exchange and excluding the impact of the markets and businesses we sold in 2016 and the first quarter.

We believe this improves the comparability of our results to the prior year. I'll refer to these results as adjusted revenues and adjusted OIBDAN and I'll refer to the direct operating and SG&A expenses as expenses.

Consolidated revenues were down 2.4%, with the growth at iHeartMedia offset by the declines in Americas Outdoor and International Outdoor. Results of both Americas Outdoor and International Outdoor were impacted by the sale of certain U.S. markets and international businesses.

Adjusted consolidated revenues grew 1.6% through the increases of 2.5% at iHeartMedia and 3.1% in International Outdoor, with Americas Outdoor up slightly. Operating income was down $306.7 million or 72.9%, due primarily to the net gain of $278.3 million on the sale of nonstrategic Americas Outdoor markets in the first quarter of 2016.

That compares to the net gain of $28.6 million on the sale of our Americas Outdoor Indianapolis market in the first quarter of 2017. Adjusted OIBDAN was down $54 million or 19%, with OIBDAN down in all segments. I'll provide additional detail on these results as we discuss each segment's financial performance later in this presentation.

Moving to Slide #5, iHeartMedia's key non-financial highlights. IHeartRadio, our all-in-one digital music, podcast and live streaming radio service, surpassed 100 million registered users in the quarter. That's a 20% increase over the prior year and iHeartRadio continues to reach user milestones at a rate faster than any other digital music service.

Our cumulative downloads and upgrades of the iHeartRadio out topped 1.4 billion in the quarter. And total listening hours were up as compared to the prior quarter, while mobile accounted for 73% of the total listening hours.

As I mentioned, our new SmartAudio product is enhancing the ad volume process for advertisers, making it look and feel like buying digital advertising to them. Moving on to our tentpole events that took place in the quarter.

We staged the fourth annual iHeartRadio Music Awards on March 5, generating 165 billion social impressions throughout the event and promotional period. That's over 40% more than we did in the prior year.

The show was simulcast on TBS, TNT and True TV and was also broadcast live on iHeartMedia broadcast radio stations and across the iHeartRadio digital platform. There were a total of 20 million both watching and listening to the live broadcast.

Underscoring our commitment to innovation in social media, for the first time, iHeartRadio Music Awards announced winners of several award categories through the artist acceptance speeches through Snapchat stories. They were also televised during the broadcast on TBS, TNT and True TV.

We also announced that the sixth annual iHeartRadio Music Festival will be held on September 22 and 23 in Las Vegas. And we have partnered with AT&T on our next two tentpole events. This Saturday, the iHeart Country Festival in Austin, Texas and this June's iHeart Summer '17 weekend.

These are another great example of how our tentpole events provide promotion and brand building opportunities for our advertising and marketing partners in addition to showcasing the most popular artists across multiple genres in music today. Turning to Outdoor on Slide 6.

Our investments in innovative digital technology continue to contribute to revenue growth for both Americas Outdoor and International Outdoor. In the first quarter, we installed a total of 23 new digital billboards in our North American markets and needed 31 additional boards in Atlanta as part of our sale of our Indianapolis market.

We now have 1,167 digital billboards across 28 markets in North America. In International Outdoor markets, we installed 577 digital displays in the quarter for a total of more than 12,500 digital displays as of March 31.

Building on our digital platform, both Americas Outdoor and International Outdoor recently entered into new agreements that include new digital displays.

Americas Outdoor signed a new 10-year partnership with the Honolulu International Airport that will provide a comprehensive digital advertising network throughout the airport that will include state-of-the-art digital assets. We are the first media company to have advertising in the Honolulu International Airport.

We also won a new 5-year contract to provide the Milwaukee International Airport with an immersive digital media program that integrates the latest innovative advertising media and technologies. In Los Angeles, we've been upselling and posting the new wall space in both the Sunset Millennium real estate development project.

They are among the largest out of home media available in the area and offers advertisers the opportunity to reach consumers in the heart of Sunset Strip. International Outdoor plans to install more than 100 digital screens in shopping malls across Sweden, increasing their presence in the country's top 20 cities.

In Switzerland, we have strengthened our position with a recent contract to install digital screens and to operate street furniture poster sites in Basel. We have installed over 150 additional Adshel Live screens, including over 75 phone box products in London. We now have over 1,000 Adshel Live screens throughout the U.K.

Now on to the review of both business segment results, starting with iHeartMedia on Slide 7. In the first quarter, iHeartMedia's reported revenues were up 2.5% and excluding political, revenues grew 3.8%.

That marked the 16th consecutive quarter of year-over-year increase in revenue, a notable achievement given the overall radio industry's performance as well as those of other U.S. media companies over the same period.

The 3.8% increase in revenues was driven primarily by trade and barter, sponsorship and other revenues related to our live events and digital as well as our core radio business. These increases were partially offset by lower revenue on traffic and weather business.

Trade and barter as well as event revenues increased, due in part to the timing of the iHeartRadio Awards Show which was held in the second quarter in 2016. And once again, we outperformed the radio market as measured by Kaplan.

We believe our outperformance is driven partially by our unique ability to offer an innovative suite of advertising solutions and tightly integrated multiplatform campaigns to advertisers that provides them with access to a national scale and reach. Expenses were up 11.2%.

This increase resulted primarily from higher trade and barter, programming costs, investments in sales capabilities and variable compensation-related increased revenue. As I noted earlier, we had expected a more robust odd market this year. We were a bit surprised by the softness.

We continue to focus on driving advertising revenue in whatever we find ourselves in and at the same time, we remain focused on actively balancing our core space against our revenue opportunities. As a result of these higher expenses, operating income declined 19.8% and OIBDAN was down 15.3%. Now let's review our second quarter pacings for 2017.

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. IHeartMedia's second quarter 2017 pacings are down 2.6%, based on our most recent information. The decline in pacing is due partly to the reduction in political revenues and the timing of the iHeartRadio Awards Show.

In addition, we believe our pacing data reflects the challenging end market. Now on to Slide 8, Americas Outdoor financials. Americas Outdoor reported revenues declined 1.1% in the first quarter. Adjusted revenues increased slightly, with both from new airport contracts and digital billboards.

This was offset by declines in our Spectacolor business, due primarily to the loss in inventory. As you can see in our results, our strategic approach to airport media through buildouts, renewals and acquisitions in both 2016 and the first quarter is paying off. And our investments in digital continue to drive revenue.

That said, the market has certainly been challenging, with some of our national advertisers pulling back on their advertising campaign spending. Expenses were up 1.7% in the quarter. Adjusted expenses increased $4.9 million or 2.6%, due primarily to higher site lease expenses related to the new airport contracts and printed displays.

Operating income was down 12.8%, resulting mainly from the sale of the nonstrategic markets in the first quarter of 2016. Adjusted OIBDAN declined $4.2 million or 4.9% due to an increase in fixed site lease expenses.

In addition to the 9 nonstrategic markets we sold in the first quarter of 2016, we closed the sale of our Indianapolis market, $43 million in cash and certain assets in Atlanta during the first quarter of 2017. The net gain on the sale was $28.6 million.

Our second quarter pacings which have been adjusted for the sale of the nonstrategic markets in the first quarter as well as foreign exchange are up 0.4%, based on our most recent information.

As a reminder, pacing data reflects a point in time and we believe the softness in the second quarter pacing data is due in large part to the challenging ad market. Turning to Slide 9 and our International Outdoor financials.

As I mentioned previously, in October 2016, International Outdoor sold its interest in the Australian out of home media company, Adshel to our joint venture partner APN News and Media. Our reported results were impacted by the sale, with revenues declining 13.4%. Adjusted revenues grew $8.3 million or 3.1%.

The increase in adjusted revenues is attributed to both our new contracts in the greater Barcelona, the U.K. and in Switzerland as well as our expanded digital inventory. Expenses during the quarter were down 10.3% on a reported basis and up $14 million or 5.7% on an adjusted basis.

The increase in expenses resulted in large part from higher site lease and production expenses. Our operating loss of $12.5 million increased $5.7 million during the quarter and adjusted OIBDAN declined $5.6 million to $19.2 million.

Included in the higher site lease expenses are fixed rent fees from new contracts, including Madrid and Barcelona which negatively impacted our margins in the first quarter. Our 2017 second quarter pacings for International Outdoor were up 2.7% based on the most recent data available.

Once again, pacings are a point in time metric and as you expect, there's inherent level of volatility week-to-week. The pacing data has been adjusted to exclude the businesses we sold in 2016 and foreign exchange rate fluctuations. Before we go to the rest of the slides, I'd like to make a few comments on CCIBV's results.

For the first quarter, CCIBV's consolidated revenues totaled $223.9 million. The impact of foreign exchange rate was $14.2 million. CCIBV's operating loss in the quarter was $20.7 million as compared to $14.6 million in the prior year's quarter. On to Slide 10. This slide highlights the items impacting comparability of our results.

I won't lead you through all the numbers on this call but as you can see, our International Outdoor operations were affected by foreign exchange fluctuations of about 5% on both the revenues and expenses in the quarter.

And as I've said, Americas Outdoor and International businesses were also impacted by the sale of other markets and businesses over the year. Lastly, as expected, political revenues were down in the quarter for both iHeartMedia and Catch Media. Turning to Slide 11. Capital expenditures for the first quarter totaled $51 million.

The IHeartMedia segment's capital expenditures related to leasehold improvements in IT infrastructure. In Americas Outdoor in associated primarily with the construction of new advertising structures such as digital displays. And International Outdoor's capital expenditures related mainly to billboard and street furniture advertising structures.

This year, we expect capital expenditures to be in the range of $300 million to $325 million. Moving on to debt on Slide 12. As of March 31, iHeartMedia's debt was $20.4 billion, basically flat with year end 2016.

In February, we exchanged $234.9 million principal amount of our 10% senior notes due 2018 with $234.9 million of newly issued 11.25% already guaranteed notes in 2021. IHeartMedia's consolidated weighted average cost of debt was 8.6% as of March 31.

Cash interest expense in the first quarter was $543.3 million and we expect cash interest expense in 2017 to be $1.7 billion. Now we turn to our balance sheet information and the debt ratios on Slide 13. IHeartMedia's consolidated cash totaled approximately $365 million as of March 31. Our secured leverage ratio was 7.4x, with total leverage at 11.9x.

Retail outdoor ended the year with $200.6 million in cash, with a senior leverage ratio of 4.3x and consolidated leverage ratio of 8.2x. The largest use of cash iHeartMedia in the quarter's interest expense which totaled $543.3 million.

Clear Channel Outdoor's cash of $86.8 million for interest and paid dividends totaling $282.5 million, including $254 million received by iHeartMedia. Before I open up the call for questions, I want to thank you again for joining us this morning.

As a multiplatform 21st century media and entertainment company, we continue to invest in innovation to strengthen our broadcast radio, digital, outdoor, mobile, social, large events and data businesses.

We're making great progress in developing industry-leading data rich analytics capabilities and automated ad buying solutions to benefit our advertising and marketing partners.

In the quarter, we launched SmartAudio for iHeartMedia broadcast radio advertisers, expanded RADAR, Americas Outdoor programmatic solution and introduced International Outdoor's programmatic buying solution in the U.K.

And our iconic events like the iHeartRadio Music Awards and the iHeartRadio Music Festival continued to create greater brand awareness, social media engagement, TV ratings and investments for our marketing partners.

And the launch of our new on-demand subscription services iHeartRadio Plus and iHeartRadio All Access extends the value of our iHeartRadio to its users. As a company, our multiple platforms and our ability to integrate them provide our advertising partners with more and better ways to connect with their target audiences.

Although the end market continues to be weaker than expected, we continue to believe that radio, outdoor and our other platforms are undermonetized, especially given radio's sustained popularity with consumers and Outdoor's continued leadership as a mass reach build.

Just remember, as I told you in my opening, radio makes up about 20% of all media consumption but attracts only 6% to 8% of each advertising dollar. That sums up our challenge and our opportunity.

So we're redoubling our efforts to close that gap by working with advertisers, agencies and brands to underscore the opportunities we offer them to engage with the right audience at the right time with the right messages and the right tools.

That's how we'll continue to make the most of the power of audio, the power of outdoor, the power of social, the power of data, the power of mobile and the power of our national local brands as well as our industry leading personalities. Now let's open the line for questions..

[Operator Instructions]. Our first question comes from the line of Avi Steiner with JPMorgan..

I've got 4 categories I'd like to touch on.

First one is on expense growth, clearly well above trend this quarter and I'm curious if you can talk to how much of that may be related to the retention bonuses, related to the work that has gone to the exchange and I think a few thousand pages now, the launch, expenses related to the launch of Plus and All Access and maybe anything related to tax work outdoor and then I've got a couple more..

It's Rich. Again, I'm not going to comment or break out any numbers specifically. There's a lot of things that's affecting our expense growth. There's the timing.

As I noted in both the earnings release and the call, of trade and barter costs, these counterprogramming costs, we had particularly on iHeart a number sales initiatives that are driving and quite frankly also as I said earlier, we expected a more robust advertising market. Just to be transparent, we've been a bit surprised by the softness on it.

What I can tell you is that Bob, myself and the rest of the management team that we are laser focused both in terms of driving advertising revenue but also making sure that we've got the right cost structure to support the, right sized cost structure to support the advertising environment that we're in and so we continue to focus on that.

So that's really on the iHeart side.

If you look at the outdoor piece and if you look at international, that's really due much more to seasonality of our revenues but we had lower margins in the first quarter compared to the fourth quarter and we had some higher site lease expenses and some production expenses and we had some new contracts in Madrid and Barcelona.

So again, part of that is just timing first quarter versus fourth quarter which is or any other quarter versus the first quarter is always smaller and then we've got some site leases and some new things, new contracts that I just highlighted. And on the U.S.

outdoor piece, yes, we've had some builds in airports which has been great, the overall growth in airports but they're also lower margin businesses and they've been able to offset declines in some of the higher margin businesses. Then we also have some contractual increase in fixed site leases. So I think that touches on all 3.

And by the way and the other expenses, just when you look at the press release, anything with respect to the expenses on the exchange offer our into exchange offer or term loan offer are in other expenses below the line..

Okay, moving on to topic 2, free cash flow was lower than we had expected. Obviously, there's a variance in EBITDA here but working capital seems to be the biggest and particularly on the AR and increase in prepaid expense lines and I'm curious if there's anything to call out in those categories specifically..

No, I'll let Bryan to comment in a second here but not really. I mean mostly impacted by some accounts receivable and prepaid expenses.

As always, AR, accounts receivable, generally kind of first quarter seasonality of our businesses and 2017 we also had a decline in the first quarter because remember we had the sale of our Australian and our Turkey businesses in 2016 which also affected the decline in first quarter working capital and prepaid was up as just at the timing of payments..

Rich said working capital of the first quarter I think most people know is our weakest operating quarter. It's also a quarter that has a disproportionate share of cash interest expense. So when you take a look at the cash movement during Q1, you see a typical pattern of cash burn due to that cash interest expense, the working capital CapEx.

I think if you compare it to Q1 2016, we had some asset sale proceeds come in so there's a dramatic variance quarter-over-quarter. But Q1 cash interest and low operating performance seasonality, related to seasonality is the main driver there..

Okay, third topic. There's language in the 10-Q around possibly reducing or delaying CapEx in order to have additional cash to meet maturities. Curious if this would be at the Outdoor level or just the parent.

I don't think I saw that language at the Outdoor level and how do you feel about that in the context of your strategy of trying to grow in this tough ad environment?.

Let me just start and I'll Brian chime in. We are, as we've done for years, there's nothing about go back over the years, we have always proactively worked in our capital expenditures and we're proactively working on our expenses.

Our job is to really grow revenue in this environment or tough environment softer than we expected and we have got to manage our expenses and working capital and capital expenditures in that environment. And so we're going to be, moving forward, we'll continue to be nimble and continue to adjust things to meet the environment we're in.

I would point out and I think I've up-to-date if you look overall compared to the traditional media companies, traditional radio companies at least as of up to a half hour or so ago and you look at our U.S.

revenue, I think for the most part, particularly on the iHeart level, we significantly outperformed both the radio industry and the traditional U.S. media companies on the revenue out there. So not these were advertising revenue is today as a company but we're really proud of our team at iHeart, U.S.

Outdoor and International Outdoor how we significantly outperformed the marketplace..

Okay. I'm going to end it on this. The press is reporting that the group is up was a deal in its current form and by your own disclosure in the level participation would seem to be low, very low.

And I'm curious as to whether you would consider changing tracks if this persists and maybe look think is built directly in hopes of coming to conventional resolution?.

I think you're going to know my response. As you know and this will pertain to all questions with respect to the private transactions that are currently out there, they are private and SEC rules prohibit us from commenting on those transactions..

Our next question is from the line of Jason Kim, Goldman Sachs..

Coming back to the expense side again, I wanted to ask from a different angle, you had mentioned that you are a bit surprised by the softness in the advertising markets but in terms of first quarter revenues, they were actually not that different from your pacing guidance that you had given back in February.

So I'm just trying to reconcile those comments at least with respect to the increases in first quarter expenses and the impact to margins in the context of revenues, actually not being that much weaker than at least what we hear or we had originally modeled and then the follow-up to that, how much flexibility you think you have in terms of bringing back down your OpEx levels to be more in line with the more muted revenue environment in the near term?.

Yes, well no, I'm not going into in terms of the guidance and pacing and probably when I see this but Daniel signed in the next appointment I am and so if you look at our pacing and I think we give out we were above the pacings since we give up to iHeart.

We were below the pacing information we gave out to the Outdoor business because again, they're points in time and the other thing I would say to be capital about pacings, the business and I've commented I think on a number of previous calls, the business continues to evolve where placement of advertising and I think we're all seeing this in the advertising industry, not only has it been softer I think than many of us expected but also the placement is later and later and later.

It's like in terms of the number of sleepless nights I had and I think we all have is because it gets closer and closer to the engagement closer and closer to replace all of our outdoor signs and billboards and digital billboards out there.

So quite frankly I think pacings are becoming less and less of an indicator quite frankly what's going to happen [indiscernible]. In terms of the expense side, there's a couple of things.

As I said, we are aggressively managing our expenses to balance it with where our revenues at the same time, the transformation to a digital and data rich company for both the radio and the outdoor business, we're looking to capitalize on the benefits of the demand for the mass reach media and the world of the dwindling TV that's out there.

We also have another dynamic [indiscernible] aware of transformation advertising is [indiscernible] and so we're also investing [indiscernible] platform.

I commented in my opening remarks about our research analytics tool that we're really excited about it but that the end of the day, we continue to feel very strongly that we've got about 20% or so which I think I also mentioned earlier in the call of people spending time are only getting 6% of the advertising revenue dollars that are spent out there.

So we have tremendous opportunity, tremendous upside and we believe that with our audience size, investing in programmatic we've got a unique position with our advertisers in both radio and outdoors, that will open up significant digital revenues as we go forward.

So we think we've taken all the right steps and like I said, we were just a little surprised overall it at one point in time about the softness in the advertising environment..

Got it.

And then if I can just follow on to the ad environment again, any big differences between national and local? I think you did call out national but I was wondering if there was any in terms of percentages anything like you can share with us?.

Yes, I'm not going to break out any of the individual percentages. Clearly, our national business has been stronger.

It has been stronger than our local business and again, I think if you look at some of the earnings releases that came out yesterday and even though this morning, when you look at advertising North American revenues, the multimarket revenues in particular for the traditional large traditional media companies, I think if we look at our results as we significantly outperformed them.

So nothing beyond that and I'd say local's been a little bit softer..

Our next question is from the line of David Phipps, Citi..

Following on the advertising, can you talk a bit about qualitatively about which geographies or which categories that you're seeing softness across all the different platforms within iHeart? Or maybe you could characterize them us was going to [indiscernible].

I'm not going to quantify each of the individual categories. I will say clearly we've got some great partners. I called some of the [indiscernible] release on AT&T has been terrific and I mentioned with in my opening remarks, that country music festival that we're working with them on.

We've got our initial pool party for the summer that we're working with them on. Cap I has been a terrific partner and so we have a number of QSRs that have been very strong partners for us in the industry. Entertainment industry has been very strong pretty much across the board.

And I say the other side of that is as you'll notice if you look at the results that came out in the last 20 years to automobile industry continues to be great partners significant piece of our revenue but I think if we just look at anything the other manufacturers are down 6%, 7% overall in the first quarter sales so it hasn't been quite as robust on the auto side as it has been in the past.

But overall it's a mix out there of pluses and minuses and I'm not going to individually comment on..

And as you look at geographic basis, does it make much difference where it is in the U.S., where your radios operate or where the billboards operate for some of the advertising or is it sporadic, is it anything broader than that?.

No, it's really different down to the individual cities.

Some areas, we're clearly benefiting by travel and tourism and home building improvements and again, if you kind of watch what's happening, if you take a step back and almost remember what our job is what we fundamentally do as a company, we connect the rent our relationships with our consumers and advertisers. Think about it. It's that simple.

So if you look at things like travel and tourism and home building and things like computers and I mentioned media industry and things like the industry and if you think about places in the U.S.

geography that benefit there is stronger in those industries you could probably come up with your own theory or your own idea us where a cause the company there were stronger based on those categories..

And could you maybe rank some of the biggest categories set up or top 3 of 5 advertises is because we get a lot of questions about the auto insert at this point?.

Yes, with auto, automobile got is to be great partners for us and I'm not going to put them in top 3, top 5 but I'm going to say you can judge or you can surmise that auto is a very important category for us in advertising revenue..

And finally, I want to ask this as gently as possible. A lot of investors that I've spoken with have followed iHeart for many, many years have low at this management team has managed well in a tough industry but expenses jumped up pretty significantly this past quarter.

How did that happen when you are in the stage where you're looking to do something different with your balance sheet and as you're facing some headwinds so our management team that is consistently done well managing expenses switches and you seem to be way out of trend this time.

So what will you say to that?.

Yes, you can ask the question gently and I'm fine everyone asked it. We've done and over the years whether it's been Bob and myself and the team here, whether it's been here at iHeart or previous companies that the 2 of us have run, you never look at one quarter or any specific quarter and that's is it a bit here.

This quarter, we happen to have a mix of trade and barter costs. We have a mix of investments that we've made in terms of timing and our talent and new contracts. I mentioned I think on the call we just didn't reveal with Elvis but we've got another tenant contracts that were renewing in the first quarter this year.

We're investing in things like I said in terms of programmatic a number of other sales initiatives that we've invested in. I think I don't have to repeat myself that I talked about SmartAudio earlier on the iHeart side.

But one thing I can assure you and you can take my word for it and you can ask our 20,000 employees in the company we are aggressively managing both expenses, capital expenditures, cash and the balance with the revenue that we see coming in.

And revenue was with all honesty the advertising environment was softer just and we thought is going into the quarter and so were taken steps to look at our guidance or revenue environment that we're in..

Just to follow on that, will some of the expenses reverse themselves in the second quarter you were most of it is some..

I'm not going to comment on anything other than I think the benefit about being our team the benefit of being around the longtime this business is you can look at credibility.

to begin look at track is 30 and so I wouldn't look at one quarter or 2 quarters are in the individual quarters as a sign of anything other than what I've said before about the investments of the business, the mix of the a little surprised by the softness that we saw in the advertising environment and you balance that with our aggressive management of our core space against the revenues that we see coming in working capital and capital expenditures and I think we've done that for years and years..

Our next question comes from the line of David Farber, Credit Suisse..

A number of my questions have already been asked. But I guess I wanted to touch base on the cash balance operational stuff has been asked.

This could be maybe a question for Brian but I'd be curious to hear how you guys feel you're navigating of the cash needs and what you're doing to improve liquidity perhaps given the '17 receivables maturity and now the way cash burn versus the their desire perhaps to find a working deal with creditors and I have one follow up..

Sure, I'll try to respond to the question, David and if I get off-track maybe let me know. But I think with respect to how we manage liquidity, the focus is first and foremost continue to focus on operations and thus let everybody else in the company other than the end of the treasury team.

With respect to what we can do in finance and treasury, we've disclosed and talked about the need to refinance or extend the ABL. We are in a period of time where are they things are going on and so we have to take the sequencing of that transaction within the context of everything else that's going on.

We have additional disclosure about managing CapEx and other spending, with rich has addressed some of those things. But most significantly is the company's proactive steps that it's taken to address our capital structure and we can go to a lot of detail about the information is out there.

We have worked quite diligently to put forth offers, generate dialogue and we hope to continue to do the things that we need to do to address the capital structure.

Because at the end of the day, the focus on operations, addressing our significant debt levels and cash interest expense and ensuring that we have liquidity to fuel the business are our top priorities..

Okay, I just want to tackle this SG&A investment again. It sounds like you guys are not giving a tremendous amount of color about how we think about the balance of the year just to continue.

But I guess maybe said a different way, would you be able to help us understand if there was investment made in this? Do you expect to return on this given the amount of time you've benefited the business.

I'm curious if there was any example perhaps more color you could give us on what types of investments they are in how we should be thinking about them perhaps as a return for point it? Any additional color around understanding the SG&A would be great. And that's it from me..

Yes, it's Rich again a couple different times let me start by first saying we always expect a return on every dollar I put out in this company. So fundamentally, we're about numbers and data and bottom line results.

Secondly, just to be clear, a couple of different times is we're not managing the company for one quarter and I think if you go back over the last number of years, I don't think anybody would accuse us in terms of being wallflowers about matching expenses and at the same time it is significantly outperformed as I said whether it's the radio industry or the other traditional media companies and quite frankly if you look at our margins compared to one of those companies, we've significantly outperformed those.

The third thing I'd say is just again and hopefully in terms of color and being transparent, I talked about and we talked about in the earnings release and I talked about this morning in my remarks that the mix of revenue this quarter with trade and barter and then you add to that the investments [indiscernible] SmartAudio and programmatic and other sales initiatives which we have to make in terms of continuing to evolve the business in terms of where the industry is going and then you couple that with a softer advertising market and we will thought we are going to have an again just look at the other companies that are announced, we significantly outperformed are actually down significantly in revenues on organic revenue on a year-over-year basis.

But I can assure you that we are active proactively managing expense base to take into account what the revenue growth is..

Our last question is from Aaron Watts, Deutsche Bank..

I just have 3 quick ones. I guess, Rich, just curious if you can clarify how much of the drag on radio pacings for 2Q is specifically due to the timing of the Awards Show or how much of it as we go..

Yes, it's a good question but I don't think is significant.

The thing again I'd emphasize with pacings, I can't emphasize this enough is ideal volatilities from a word but the week to week change of new guys I know you'd like to see the week-to-week pacings but the week-to-week pacing change in this business is probably more dramatic than you think anything is probably for all the advertising industry and all the advertising businesses.

The placement of advertising close and closer to the ARD and as I said, I'm like a broken record on this but pacings quite frankly dubious much less of an indication as to what this really happening in the business is of an ever been and appeared be somewhat years in the new businesses..

And maybe on that note just bigger picture, are you getting any sense from your advertisers have in are they sitting on their dollars are they putting those dollars to work in other media and match costing the softness for you specifically?.

I think advertisers, I think there's a lot of things happening in the advertising world. I mean you so we also what the Google numbers that came out a week or so ago Facebook when you say numbers last night obviously, they had very strong revenue growth out there.

And as I said, we continue to significantly outperform both the radio industry and the traditional media companies from a revenue standpoint. So I don't think that the advertising market having said that is soft. It was softer than we thought it was going to be.

And I think we look at the data that's out there this coming autumn consumers this coming off consumer spending and the numbers are the economy has been weak so we all see the same stuff really am not going to speculate at it with people are sitting on or those allocation of 2 the big digital players out there but I think we're really proud of our team, our management team both at iHeart and the U.S.

outdoor in the International Outdoor business for the market share that we've been able to take with the dollars available.

Having said that, we are still wildly, wildly undermonetized compared to the share of audience that we have, whether that's on the radio or the outdoor side and our job is to close that gap and that's what Bob, myself and the rest of the management team that's what we do and I assure you that 24 by 7, we're trying to close that revenue GAAP and again manage the expense base with what the revenues are going to be..

Last one for me and I appreciate again the time.

I recognize it's early days but can you talk about your initial experience in terms of the uptake of your enhanced and subscription offerings on the app and's or any realistic target we should think about in terms of percentage of your registered users you think you can get to ante up the premium offerings?.

Yes, I mean, look, I'm not going to give any specifics on that. I mean we're really pleased with iHeartRadio Plus and iHeartRadio All Access all our on-demand services.

I think when you think about it is a good example of our get additional products and value for our listeners while also introducing new revenue streams and the significant service recently launched include the adoption of the services in line with our expectation that's out there. I say the financial impact is immaterial.

But again, it's just another good example of our team here and the ability to launch that product, our relationship with the radio industry start the music industry partners us to make the services available out there for our listeners. And so far, everything has been in line with expectations and the reception has been great..

Operator, we're going to conclude the call for today. Thank you for joining us. As you know, Brian and I will be available to take any calls over the next few days that you may have. Again, thank you again. Have a good day..

Ladies and gentlemen, this conference will be made available for replay after 10:30 a.m. to day running through June 4, 2017 at midnight. You may access the AT&T executive playback service at any time by dialing (800) 475-6701 and entering the access code 422506. International. [Technical Difficulty].