Eileen McLaughlin - Vice President, Investor Relations Rich Bressler - Chief Financial Officer Brian Coleman - Senior Vice President and Treasurer.

Avi Steiner - JPMorgan Stephan Bisson - Wells Fargo.

Ladies and gentlemen, thank you for standing by. And welcome to the 2017 Fourth Quarter and Full Year Earnings Conference Call for Clear Channel Outdoor Holdings, Inc. Following today’s presentation, we’ll have a question-and-answer session [Operator Instructions].

I will now turn the conference over to our host, Eileen McLaughlin, Vice President, Investor Relations. Please go ahead..

Good morning, and thank you for joining Clear Channel Outdoor Holdings 2017 Fourth Quarter and Full Year Earnings Call. On the call today are Rich Bressler, Chief Financial Officer; and Brian Coleman, Senior Vice President and Treasurer.

We'll provide an overview of the 2017 fourth quarter and full year financial and operating performances of Clear Channel outdoor Holdings, Inc. and Clear Channel International, B.V. After an instruction and a review of the quarter and fiscal year, we'll open up the line for questions.

Please note that we will not be able to answer any questions on iHeartMedia's operations or its bankruptcy process. 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 represent management's current beliefs. 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 review the statements of risk contained in our earnings press releases 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've provided 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, clearchanneloutdoor.com.

Please note that our earnings release and slide presentation are available on our Web site, www.clearchanneloutdoor.com, and are integral to our earnings conference call.

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

And also please note that the information provided on this call speaks only to management's views as of today, May 1, and may no longer be accurate at the time of a replay. With that, I will now turn the call over to Rich Bressler..

Thank you, Eileen, and good morning, everyone. Thanks for joining Clear Channel Outdoor's Fourth Quarter and Full Year 2017 Earnings Conference Call. As you know, in the past, we have presented the iHeartMedia and Clear Channel Outdoor results at the same time. However, this quarter we will present just Clear Channel Outdoor.

During iHeartMedia’s bankruptcy process, we will not be hosting an earnings conference call for iHeartMedia. In the fourth quarter, Clear Channel Outdoor's revenues increased. However, revenue declined slightly after adjusting for the impact of foreign exchange and the sale of certain outdoor businesses.

Operating income and OIBDAN declined in the fourth quarter. For the full year, revenue decreased, but revenue increased after adjusting for the sale of certain outdoor businesses and the impact of foreign exchange. Operating income and OIBDAN were down in 2017.

Before discussing our fourth quarter and full year financial performance in detail, let's first review our initiatives that are transforming Clear Channel Outdoor into a digital and data-driven media company.

Clear Channel Outdoor is one of the world's largest outdoor advertising companies, with more than 570,000 displays in 31 countries, including 43 of the 50 largest U.S. markets. As people spend more time out of home, we continue to innovate across our global network to help brands connect more effectively with their target audiences.

So in today's data-centric world, our strategic initiatives are focused on delivering what advertisers increasingly expect.

We believe our continued investments in both digital display inventory and technologies to enhance our advertising partners' campaigns with programmatic ad buying solutions and data analytics, including attribution, will include the depth, scale and monetization of our offerings.

These long-term investments enable us to leverage our growing global networking capabilities in order to compete against top digital media companies. Our digital display technology is a dynamic medium, which allows our advertising partners to engage in real-time, flexible and creative advertising on our 15,000 digital displays across our markets.

Looking ahead, the industry researcher Magna has projected that digital out-of-home will likely be the fastest growing advertising medium over the next 4 years, growing more than 10% a year, which is why we continue to expand our digital network.

In addition to making advances on digital displays, we are also at the forefront of integrating out-of-home media with data analytics and attribution, connecting brands with audiences as well as developing first to the outdoor market programmatic solutions.

We believe improving the ad-buying process for our advertising and marketing partners, along with providing the data analytics, makes us more integral to their campaigns than ever before and opens up new pools of revenue. In our Americas segment, we continue to expand our digital display options and win new contracts.

We are also a pioneer in integrating out-of-home media with mobile data analytics and attribution as well as launching our programmatic solution for our advertising and marketing partners. We have close to 1,200 digital displays in 28 markets across the U.S.

While digital boards are a relatively small percentage of our inventory, they reached 99 million adult, 18 and over, providing our advertising and marketing partners with access to digital displays in strategic, high-traffic locations. Our most recent addition was in San Francisco, where we launched the city's first digital urban panel network.

This is a street-level digital ad network with 100 dynamic IP-addressable HD screens. Combined with Clear Channel Outdoor RADAR campaign planning and attribution solutions, brands and agencies are able to target desired audiences in highly sought-after urban areas.

Using anonymous mobile location data, we deliver insights our partners want, such as identifying and measuring the audiences that can see our inventory, whether it's digital or print billboards, wallscapes, street furniture or in airports.

With RADAR, national and local brands across retail, entertainment, tech and travel verticals successfully use its tools to improve the performance of their campaigns, including increased visits among target audiences.

For example, a restaurant chain's recent campaign generated almost 150% lift in new visits if they're implementing a solution from RADAR. 35% of those new visits were within 1 day of exposure to the out-of-home ad. We also continue to enhance our first-to-the-outdoor market private marketplace programmatic buying solutions.

Our programmatic solution makes our digital inventory available to programmatic buyers due to platforms they already use to buy digital, mobile and other programmatically traded media. It includes digital billboard inventory that reaches more than 90 million adults monthly and airport inventory that reaches 43 million passengers monthly.

While still early, our programmatic business is building good momentum. At International, we believe that having the right products in the best locations, which enable advertisers to reach their target audiences, is the key to our successful portfolio strategy.

Our ability to win and execute new contracts and expand our digital display network has delivered on this strategy and fuelled revenue growth in 2017 across our European markets, including Spain, the United Kingdom and Switzerland. Spain was the largest driver of international growth in 2017.

In particular, we completed the rollout of more than 2,000 advertising panels in Madrid, including 300 digital screens, following the 12-year street furniture contract win in 2016.

The flexibility of digital offers brands to reach and engage in the city's audiences is attracting existing customers like Coca-Cola and Samsung as well as new advertisers, including Nivea, Amazon and Netflix. In the U.K., over half of Clear Channel's U.K. 2017 revenue was generated by digital displays.

With the conversion of over 300 payphones to high-tech units, we now have a network of more than 1,000 Adshel Live digital panels nationwide. We also expanded our major supermarket displays to over 650 screens with Asda and Sainsbury's.

And we continue to expand our premium digital store network, giving advertisers access to the creativity and flexibility of digital out-of-home on a national scale. In Switzerland, we now operate a network of over 1,000 advertising panels at bus and tram stops around Zurich.

And our investments in technology are fuelling our digital out-of-home strategy, providing the automation and flexibility our advertising and marketing partners expect. For example, in 2017, we launched the first out-of-home proprietary programmatic ad buying offer in Europe. Our initial launches in the U.K.

and Belgium enabled the first part of our out-of-home programmatic solution, which allows advertisers to plan and buy campaigns more efficiently. In addition, we are maximizing the yield on our inventory through flexible selling and delivery of real-time content to our screens.

When a digital out-of-home network reaches scale, we can give advertisers a new way to reach their audiences, allowing them to tailor and deliver their messages based on a variety of contextual factors such as time of day, location and weather.

Looking ahead in 2018, we will continue converting print boards to digital as quickly as we can attain regulatory approval in addition to winning new contracts for both the Americas and International segments. At the same time, we continue our transformation into a data-driven and technology-fuelled media company.

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 result discussion, I'll also talk about our results adjusting for foreign exchange, excluding the impact of markets and businesses sold. We believe this improves the comparability of our results to the prior year.

I'll refer to these results as adjusted revenue and adjusted OIBDAN. And I'll refer to direct operating SG&A expenses as adjusted expenses. Starting with the fourth quarter. Consolidated revenue increased 0.9% compared to the prior year due to foreign exchange.

Adjusted consolidated revenue declined 0.3%, with the increase in International offset by a decline in the Americas. Consolidated operating income declined 64.3%, primarily due to the net gain of $128 million recognized in the sale of our business in Australia in the fourth quarter of 2016.

Adjusted consolidated OIBDAN was down 12.3% due to declines in Americas and International. For the full year, consolidated revenue was down 3.6%, while adjusted consolidated revenue was up 1.2%, with International's increase partially offset by a slight decline in Americas.

Consolidated operating income was down 63.5%, primarily due to the net gain on sales in markets and businesses we sold in 2016. And adjusted consolidated OIBDAN was down 12.1%, with both Americas and International down. Moving on to Slide 5, I will discuss Americas financial results in more detail.

During the fourth quarter, Americas' revenue was down 3.2%, and adjusted revenue was down 1.5%. The majority of decline in adjusted revenue is attributed to the markets we exchanged in the first quarter of 2017. Expenses were down 3%, and adjusted expenses were down 0.5%.

The decline in adjusted expenses included utility savings from conversion to LEDs as well as a reduction in employee costs, which was partially offset by higher site lease expense. Operating income was down 12.6%, and adjusted OIBDAN was down 2.9%. For the full year, revenue decreased 1.7%, and adjusted revenue decreased 0.6%.

The decline is due to the impact from the markets we exchanged in the first quarter of 2017, partially offset by higher revenue from new and existing airport contracts. Expenses were slightly down in the year.

Adjusted expenses were up 1.4%, primarily from higher airport and fixed site lease expenses partially offset by utility expense savings resulting from increased LED light installations and lower bad debt expenses. Operating income was down 8.1%, and adjusted OIBDAN was down 3.9%.

Before we move on to pacings, I want to point out that beginning January 1, 2018, our Latin American operations will be included in our International segment and not our Americas segment. The first quarter pacing data has been adjusted to reflect these changes. Our pacings for the first quarter were up 0.2% as of the end of the quarter.

Turning to slide 6 and our International finances. In the fourth quarter, reported revenue was up 4.7% and adjusted revenue was up 0.9%, with growth across several markets, including China, Spain, Switzerland and Sweden, primarily from new contracts in digital expansion, partially offset by lower revenue in Belgium and Ireland.

Expenses were up 11.2%, and adjusted expenses were up 6.8%, primarily due to the $10.2 million expense recorded to correct for accounting errors as a result of the misappropriation of cash identified in our China subsidiary and higher site lease expense in certain countries experiencing revenue growth.

Operating income was down 16%, and adjusted OIBDAN was down 15.7%. On a full year basis, revenue declined 5.4%, and adjusted revenue increased 2.9%. The increase in adjusted revenue is due to growth of our several markets, including Spain, United Kingdom, Switzerland and China, primarily from new contracts in digital expansion.

Expenses were down 2.1%, and adjusted expenses increased 6.2%. The increase in adjusted expenses is due to higher site lease expenses in certain countries experiencing revenue growth and a $9.6 million expense reported to correct the accounting errors related to the misappropriation of cash identified at our China subsidiary.

Operating income was down 26.1%, due in part due to a gain on the sale of our business in Australia. Adjusted OIBDAN was down 11.5%. Pacings for the first quarter were up 8.2% as of the end of the quarter. Before we go on to the rest of the start, I would like to make a few comments on CCIBV's results.

For the fourth quarter, CCIBV's consolidated revenue totaled $321.9 million, an $18.1 million increase from the prior year. On an adjusted basis, CCIBV's revenue increased $6 million during the fourth quarter. CCIBV's operating income in the quarter was $25.1 million as compared to operating income of $167.9 million in the same period 2016.

The decline is primarily due to net gain recognized on the sale of our business in Australia in 2016. On a full year basis, CCIBV's consolidated revenue totalled $1.82 billion, an $86.9 million decline from the prior year. On an adjusted basis, CCIBV's revenue increased $22.7 million year-over-year.

CCIBV's operating loss was $1 million in 2017 compared to operating income of $100.7 million in 2016. 2016 included a net gain from the sale of our business in Australia, partially offset by the loss on the sale of our business in Turkey. Please turn to Slide 7.

Capital expenditures for 2017 totalled $224.2 million, a 2.4% decline from the prior year, with $74.6 million in Americas Outdoor primarily used to fund digital billboards and digital displays in airports and $146.4 million International Outdoor used to fund new street furniture displays and digital displays.

In 2018, we expect capital expenditures to be in the range of $200 million to $220 million. The slight decline is due to the successful completion of our installations in Spain. Now on to Slide 8. Clear Channel's consolidated cash was $144.1 million as of December 31.

Our debt was $5,226,700,000 million, a $149.7 million increase from the prior year due to the issuance of $150 million and incremental 8.75% CCIBV senior notes [indiscernible]. The weighted average cost of debt was 7.1% as of December 31. During 2017, cash interest expense was $374 million, and cash dividend was $333 million.

Our senior leverage ratio was 4.6x, with consolidated leverage of 8.9x. We expect cash interest expense in 2018 to be approximately the same as 2017. Before taking your questions, I want to thank you again for joining us this morning. We believe the outdoor sector is under-monetized and has room to grow as people spend more and more time out of home.

To fuel this growth, our vast global network leverages audience insights and product innovation in order to connect advertising consumers in the right place at the right time. For our business, it is critical to offer digital solutions that advertisers expect.

And that is why we'll continue to build out the platforms that allow us to more effectively compete in a world increasingly driven by digital and data.

By growing our digital reach, enhancing our data analytics and attribution capabilities and expanding programmatic ad-buying solutions for our advertising and marketing partners, we expect to strengthen our ability to win new contracts and become more integral to the campaigns of our advertising and marketing partners.

Before we open the line for questions on Clear Channel Outdoor's operations, I would like to note that I'll not be able to answer any questions on iHeartMedia's operations or its bankruptcy process..

I also want to let you know that CCO 10-K is delayed, and we are working with all parties and using our best efforts to file our 10-K as soon as possible. This delay is related to the misappropriation of funds I referred to earlier. Operator, we can take our first question now..

First question will come from the line of Avi Steiner of JPMorgan. Please go ahead..

Hi, good morning. Thank you for taking the questions. I've got a few here, and I'd like to start, if I can, on the top line. So iHeartMedia media yesterday filed an 8-K, and I'm not asking about them, but they provided an outlook for CCO to grow in 2018 in both the Americas and internationally.

And I'm curious what gives management confidence in that growth number, particularly in the Americas when FX and asset sale adjusted revenue was down slightly in '17? And then as a quick addendum, did I hear correctly that International is pacing up 8.2% in Q1? And is that LATAM related, or is there something else in there?.

So on your second question, just to take them in reverse. Yes, you did hear correctly. And that is, if you look at the pacing, of up 8.2%, we feel pretty good about that strength. It's led really by a number of places. It's China, it's Spain, it's Italy. We're having a nice quarter in Switzerland, Sweden, the UK.

So it's pretty broad strength across the entire portfolio. When you look to the first quarter of 2018 coming off the fourth quarter of 2017, just as a reminder, the majority of decline I outlined in the remarks was due to the impact of the markets we swapped in the first quarter '17.

There was also a small negative impact from the Caribbean airports that were impacted by the hurricane. And again, in the fourth quarter, our local business and airport businesses were both up. International business, I think, is, was really kind of with the entire outdoor industry was soft and was down.

In terms of 2018, we referred to, we are really excited and continue to believe the underlying fundamentals, still promising of the business.

And the focus of our advertisers, again, the ability to highlight on audience insights, speed of execution and we continue to be in transition, as you know, on digital billboards, converting from static to digital.

And we'll probably have, I'd say, about 45 to 50 new digital billboards in the first quarter, more than we had in the first quarter last year.

And that, along with everything else I talked about, the successes with RADAR, starting to see the early successes of programmatic, where we have about 1/3 of our advertisers using programmatic on new-to-the-outdoor business. So if you kind of take all those pieces together, and that's really what we anticipate driving our growth..

I appreciate the color, switching gears here. The due-from-iHeart amount was written down to $212 million.

What was the basis for that 80% reduction of the company's confidence in the recovery there? And assuming there is a recovery in cash, should we assume repayment will be treated as it has been historically, i.e., distributed out of Outdoor? Or is it possible the agreement is amended to keep any repaid amounts down at CCO for debt repayment or any other usage?.

Avi, it's is Brian. So there's a couple of components to your question. I think the first is the valuation of the impairment to the note. And that's something we're not going to get into a lot of details on. It is GAAP accounting process.

As you're aware, the bankruptcy filing included proposed restructuring of indebtedness, and that would include the unsecured obligation between iHeart and Clear Channel Outdoor. But it did not give specifics with respect to that proposed settlement.

So the accounting folks had to go through and determine whether or not a reserve against the account receivable is appropriate. They determined it was. And then they went through an accounting process to best estimate what that amount would be. And that's really, I think, all we're going to say about the valuation of the receivable.

With respect to payments under the intercompany agreements, I think it's important to understand that there really is no restriction per se to make a distribution.

You have seen that in the past because of 1 or 2 events, either, a, the distribution was done by the intercompany note committee as a result of the threshold amount under the intercompany note being reached. And in that specific case, pursuant to the settlement agreement, a distribution is prescribed.

I think in the other cases, it related to asset sale proceeds or a mirror payment related to assets or proceeds. And so also it was deemed by the full board to be appropriate to make a distribution.

But the general board can make a demand under the note and does not necessarily have to declare a distribution unless there's some other agreement, like the settlement agreement, where they deem it's appropriate to do so. So I don't think an amendment to the intercompany arrangements would be necessary..

And then just thinking about operationally, back to CCO here, I think it's historically been a cash user in the first quarter or maybe even the first half. There's some seasonality in there.

But If CCO needs cash beyond its current liquidity position, at least domestic cash, accessible cash, is that something we should expect to fund it down from parent or is there boring capacity down at Outdoor?.

On a day-to-day liquidity basis, you should assume the cash management arrangements remain in effect. And so the funding is available from the parent, and that is the cash management arrangements have been approved to the core process. Is there some additional debt capacity within the organization? There is some, but it's limited.

The company does have a $75 million revolver that has some availability that could also be used. But I think generally, the right way to think about it is if there's a daily liquidity need at Outdoor, iHeart will fund it via the cash management arrangements..

Great. Almost done here, and appreciate the answers. At the risk of stating obvious, the current leverage profile is elevated, relatively short-dated maturities, I guess maybe it's a longer 2-part question. But how does management think – what does the management think is the right level – leverage level for this business.

Have you given thought to what the right cap structure may be, secured, unsecured? And how might you get there really? And how do you think about all of that in the context of the timing of the spin via taxable or tax-free?.

Yes, there's a lot there as well. You're asking a good question, and it is obviously something that we've been thinking about, and we have numerous financial relationships that have been itching us as well. But again, it is early days, and we're still working on the complicated process of a prospective separation.

And so there's not a whole lot to discuss here other than we continue to work with iHeart and Outdoor, working together to try to figure out what the appropriate capital structure is. That will obviously, sooner or later, involve other constituencies under the RSA.

But, yes, we're thinking about it, but I couldn't tell you right now what the right leverage point is, what the makeup of secured and unsecured is. We are getting pitched and seeing some information, but it's really early days. And all of that will be negotiated as a part of the bankruptcy process and the separation -- ultimate separation..

Maybe I'll end it on this, and I assume I'll get roughly the same answer. But thinking beyond that, is it too early to ask how you think about the strategic landscape for CCO, whether it's a REIT of the U.S.

business, sale or other strategic alternatives? How do you think about any of that? And thank you very much for questions I’ll go back into queue..

Yes, I'll take a shot at it, and then Rich can weigh in if he wants to come over the top. I think it is early. But obviously, things like positioning a separated outdoor, or it could REIT, is desirous. And it's something I think that we would attempt to do.

With respect to opportunities post-separation, again, that's something that the operators of outdoor, and ultimately, they will need to make that decision. The board of Outdoor, that's really not for me, but I do think they see initial separation as being advantageous. Rich, I don't know if you have anything to add..

The only thing I'd add, Avi, is that, and for everybody on the call, ultimately, that's a decision for the ownership group and the board, and they'll really have to make that decision. I think our objective here is to make money for all of our stakeholders.

And so I think everything is going to be put through that lens, what's creating the most value for all of our stakeholders..

Our next question will come from the line of Marci Ryvicker, Wells Fargo..

It's Stephan for Marci.

Regarding the separation, do you guys have any kind of expectation regarding the timeline or milestones we should be looking forward just in public documents?.

Stephan, It's Rich. I appreciate that. But really I think, as Brian highlighted, we continue to move along in the process. We're pleased that we were able to go in at the iHeart level.

And just as a reminder, the Outdoor business did not file, and we're pleased that we were able to go in at the iHeart level with a majority of our creditors agreeing to the terms of the deal. And we're moving through the process as expeditiously as we can.

And again, we continue to be pleased, and we know this has affected our business, whether it's our business with advertisers, our marketing partners, our employees. And that's our objective, to keep the business moving forward seamlessly..

And then to clarify the pacing down, I think you said that was as of quarter ending Q1?.

Correct..

And then do you have any early read on how things were in April?.

I'm not going to make any further comments other than the pacing data I gave at the end of Q1..

And then, I guess, lastly, the movement of LATAM from International to Americas, do you guys have ballpark revenue and OIBDAN for the year that's moving from one segment to the other starting in '18?.

Yes. I think it's in, if you go, I don't know if you've had a chance to look at it, but if you look at the backup materials in the slide, I think we highlight what the breakout is in there. I think it's on slide 14. I think it's [indiscernible]..

I would now like to turn the call back over to our host for any closing remarks. Please go ahead..

Thank you, everyone, for joining us this morning. As in the past, Brian and I will be available to take any call this afternoon. And have a good day. Thank you..

Ladies and gentlemen, it does conclude our conference call for today. We'd like to thank you for your participation in today's iHeartMedia teleconference call for Clear Channel. And thank you for using our service. Have a wonderful day. You may now disconnect..