Ladies and gentlemen, thank you for standing by. Welcome to the 2019 Third Quarter Earnings Conference Call for Clear Channel Outdoor Holdings, Inc. [Operator Instructions]I’ll now turn the conference over to your host, Eileen McLaughlin, Vice President, Investor Relations. Please go ahead..

Good morning. And thank you for joining Clear Channel Outdoor Holdings 2019 third quarter earnings call.On the call today are Will Eccleshare, Worldwide, Chief Executive Officer; and Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings, Inc.

In addition, Scott Wells, CEO, Clear Channel Outdoor Americas is on the call.We'll provide an overview of the 2019 third quarter operating performances of Clear Channel Outdoor Holdings, Inc.

After an introduction, and review of the quarter, we'll open up the lines 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 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 risks contained in our earnings press releases and filings with the SEC.During today's call, we'll 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 in the financial section of our website, www.investor.clearchannel.com.Please note that our earnings release and the slide presentation are also available on our website, www.investor.clearchannel.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 that you view each slide as William and Brian comment on them.Also please note that the information provided on this call speaks only to management's views as of today, November 6, 2019, and may no longer be accurate at the time of a replay.With that, I will now turn the call over to William Eccleshare..

Thank you, Eileen. Good morning, everyone, and thank for taking the time to participate in today's call.

As we discussed this summer, our vision is to create a unique mass-reach global media platform, delivering our client's messages across our distinctive portfolio of digital and traditional displays.With that in mind, given that it is only our first full quarter reporting our financial results as an independent company, I want to take this opportunity to explain our business, our end market and our plan to execute on our vision and create shareholder value.Not only is 2019 a transition year for us in terms of separation from iHeart, we believe it represents the transition in terms of operating performance as well.

With challenging results in our International division this year due to the unprecedented difficulties in our China investment and some contractual non-renewals in Europe, we are optimistic going forward, based on our belief that the market is robust and represents a significant growth opportunity from the difficult 2019 performance we've experienced.When you combine this view with our expectation for continued growth in the U.S., which represents approximately 2/3 of our OIBDAN, we are excited about executing a plan that reduces leverage through organic growth, augmented with internal growth investments funded with cash flow.Of course, as we’ve indicated in the past, to the extent an opportunity presents itself to accelerate this positive value and fairly reflects the future value of a business or region, we are open to that as well.

We intend to provide more clarity on this plan by providing guidance for 2020 on our Q4 call in February.Please turn to Page 4 of the investor presentation. We have 4 key pillars that are guiding our strategic decision-making.

The first is growing inherent strength of the out-of-home medium.We continue to see strong demographic trends that increase our audience reach. In order to capitalize on these growth trends, we continue to build our unique global footprint in key markets around the world.The second is leveraging our leadership in technology and data.

Through our consumer data analytics, we are making out-of-home advertisement even easier to plan and buy and are enhancing our ability to demonstrate the superior return on investments of our medium.

We're also focusing on digital displays that enable greater flexibility for our advertisers and allow additional creativity to engage consumers.The third pillar is developing our distinctive customer focus. We remain focused on maintaining sales excellence with sophisticated tools to optimize the yield of our asset base.

And finally, our fourth pillar is continuingly improving our capital structure to enable us to make accretive investments to our business.With that said, Brian and I are excited to update you today on the progress we are making in these areas by providing highlights of our results for the quarter.

On a consolidated basis, revenue decreased 1.6% to $653 million. After adjusting for the impact from foreign exchange rate fluctuations, consolidated revenue increased 0.6%.

This was driven by continued strong revenue growth in our Americas segment.In the International segment, the strength in our highly digitized European and Latin American market, including the U.K., was more than offset by the continued weakness in China's consumer economy.

You will recall that we own just over 50% of our Chinese investment, Clear Media limited but consolidate 100% of these results under U.S.

GAAP.These results keep us on track to deliver on the guidance we provided in August and reflect the momentum we're seeing in our Americas business as well as the continued strong execution of our strategic growth initiatives globally.As a reminder, the outlook we provided in August for the second half of 2019 was for Americas revenue and OIBDAN to increase mid to high single digits and for our International businesses revenue and OIBDAN, excluding China and the impacts of foreign exchange rates, to be up low single digits.As Brian will discuss in more detail, we're also taking important steps regarding our capital structure.

This past summer, we completed a series of financing transactions that immediately resulted in an improved balance sheet, reducing our net leverage and cash interest payments.As a result of these financing transactions, we strengthened our strategic flexibility and increased our free cash flow generation.

We now have a runway to fully focus on executing our business strategy and elevating our operating performance to further drive free cash flow.

We will continue to take advantage of opportunities to strengthen our balance sheet going forward.Since becoming a newly independent company earlier this year, we have continued our transformation into a reenergized and ambitious organization.

We're focused on leveraging our technology investments to further bolster our value proposition and grow our customer base in the global out-of-home advertising sector.Moreover, we are executing our plan during a period of renewed growth for the out-of-home industry in and both our core Americas region and in Europe, where our ability to deliver a unique combination of reach together with targeted activation is ensuring that out-of-home is the fastest growing traditional medium.The world's biggest brands, including leaders in technology and e-commerce, are increasingly acknowledging and turning to the Outdoor medium to drive awareness of their brands.

We are seeing increasing evidence at the way in which out-of-home enhances the value of other media activity.For example, Facebook recently released a study on how combining out-of-home with Facebook advertising can help brands reach a broader and younger audience at all stages of the sales funnel.Moving on to Slide 5.

Our buyback portfolio now spans 450,000 print and digital displays, reaching millions of people monthly across the globe, making our Clear Channel Outdoor one of the world's largest outdoor advertising companies.In the United States, we installed 18 new digital billboards during the quarter and now have more than 1,300 digital boards and more than 1,600 digital displays, which represents approximately 32% of our Americas revenue in the third quarter.And in our International markets, we installed approximately 1,000 new digital displays for a total of more than 15,000, which represented approximately 27% of International revenues during the quarter.

Excluding China, which has limited digital displays, digital revenues accounted for 32% of total International revenues.Please turn to Slide 6.

We're focused on expanding the value and revenue-generating ability of our considerable assets by creating CCO RADAR, our integrated platform that efficiently leverages data analytics to deliver highly targeted and measurable advertising solutions.

And we're continuing to invest in our programmatic offer to simplify the placement of out-of-home advertising.In other words, we're making it easier to plan and buy advertisements, while at the same time tapping into data to provide customers with proof-of-campaign delivery and return on investments.

We are evolving our omni-channel suite of solutions, including our first-to-market RADAR platform.RADAR leverages aggregated, anonymized, opt-in data sets to help advertisers understand consumers' behavior and travel patterns in order to best reach the right audience segment in ways that deliver measurable results.

We expect to launch RADAR data solutions in Europe in 2020, starting in the U.K., Sweden and Spain.These efforts are resonating with advertisers and how they view our medium and our specific product suite, which is supporting our growth momentum and our promising long-term outlook.We're demonstrating the creativity of our medium and driving engagement among target audiences at the right time and in the right place.

And this is a very important position to be in because it increasingly gives us a central seat at the table as brand evaluate how to fully leverage a mixed-media approach to driving results.Turning to recent developments in Americas, please turn to Slide 7. In the Americas region, our local business continues to deliver healthy growth.

And we're continuing to see strength in the national out-of-home market as well.

As we leverage the strategic initiatives we've been developing over time.Major advertisers are continuing to ship from other media to out-of-home in the larger market as they learn about the effectiveness of our medium and our enhanced targeting and data analytics capabilities.We continue to develop scalable solutions that address the needs of our advertisers, including introduction of UK's abilities through RADAR.

With RADAR, Clear Channel can now measure the impact of out-of-home in driving consumer behavior whether that be in app downloads, viewing of TV content, purchasing consumer goods, automotive sales and more.In our quest to capture an increasing share of advertising spend, we're also continually evaluating ways to enhance the value of our existing displays.

Just a month ago, we announced the launch of the nation's first all-digital U.S.

airport media network with a groundbreaking transformation of our out-of-home footprint in the San Jose International Airport.Fully integrated with our RADAR solutions suite, the ad network, which span 82 new digital screens will be made available exclusively to foundation sponsors, beginning with Google Cloud and Alaska Airlines as well as a limited number of other advertisers.Continuing to build on our real-time digital capabilities, we recently activated the first weather-triggered programmatic ad campaign in Times Square, in airports and across our roadside inventory.

This enables advertisers to reach consumers with relevant products in an audience-centric and contextually relevant way depending on weather conditions.While digital remains central to our transformation, we also continue to develop new avenues to innovate our classic print board and expand the revenue potential of our print footprint.

All our RADAR tools are equally applicable to print as well as digital signs, and we are seeing good growth in our print revenue this year.Earlier this month, we debuted over 1,300 new visually striking printed out-of-home displays across the U.S., aimed at meeting advertisers' growing demand for large-scale printed street-level out-of-home media.

These new premiere panels bring nearly bulletin sized media down to earth for even greater visibility and engagement in highly trafficked urban upscale and night-life areas.Further highlighting the strength of our traditional printed business in the media mix, during the past month, we partnered with a major movie studio to develop an advertising campaign that expanded beyond the traditional movie launch footprint in New York and LA with a campaign that included 161 bulletins across 16 markets, many of which leaned in to the creative use of extending the bulletins for an even larger impact.

All of these and other initiatives underway reflect the breadth of our Outdoor offerings and our efforts to maximize the creativity, flexibility and reach of our platform.Now please turn to Slide 8.

On the International front, we are close to completing the rollout of our new street furniture network in Paris and already have prominent brand advertising campaigns in place, including Éric Bompard, Chanel, Netflix, Uber, Coca-Cola and Calvin Klein.As we previously noted, our partnership with the City of Paris, which runs through 2024, represents a transformative win for our French operations and is one of the largest out-of-home contracts in Europe.In addition to covering the French capital with over 1,600 street furniture units, we'll also now be able to deliver a national network campaign offer giving advertisers access to more than 26 million French residents every week.

Outside of Paris, we also recently won the contract to serve the Toulouse subway, one of France's largest metropolitan areas.Launching in January, the 6 year contract includes a broad digitization initiative, which will increase the subway digital screen footprint from 30 to 95, while de-cluttering print sites from 415 to 332.In September, we celebrated installation of the 2,000th Adshel Live digital screen in the U.K., our digital street furniture product, which cemented Adshel Live's network position as the UK's largest individual digital out-of-home network by reach.

Our 2,000th Adshel Live screens provide advertisers with the opportunity to deliver approximately 17 million daily impacts reaching 38% of the U.K.

population weekly across 100 towns and cities.In Sweden, we’ve continued to execute on our national digital expansion efforts and recently reached a milestone of 1,000 digital screens across the country's biggest cities of Stockholm, Malmö, Gothenburg and Solna.

We are the only out-of-home providers to offer advertisers digital street furniture solutions in the country's top 3 cities.So in summary, we are continuing to make notable progress in executing globally across all facets of our strategic plan.

With our largest business, America's revenue is up over 8%, and OIBDAN up over 10% in the quarter and year-to-date, including double-digit growth in digital revenue.We believe we will continue to benefit from our technological transformation, particularly the development of our proprietary RADAR tools and the positive audience trends for the Outdoor medium.And now if you can please turn to Slide 9, I'll turn the call over to Brian for the financial review..

Thank you, William, and good morning to everyone.

It has certainly been an eventful quarter for our business segments, and it was also a very productive one for our financial team as we completed a series of Capital Market initiatives aimed at strengthening our financial position.I'd also like to echo William's optimism about our opportunities going forward in a robust market with significant growth opportunities above and beyond the challenging 2019 performance.First, I will review our third quarter results, followed by a review of our capital structure.

As in the past, during our GAAP results discussion, I'll also talk about our results adjusting for foreign exchange. We believe this improves our comparability of our results to the prior year.

I will refer to these results as adjusted revenues, adjusted expenses and adjusted OIBDAN.Our results this quarter reflect a continuation of what we saw in the second quarter, 2 very different stories.

The Americas segment continues to deliver strong growth while our International results continue to be impacted by the substantial decline in revenues from Clear Media Limited, our investment in China.Consolidated revenue decreased 1.6% to $653.4 million.

After adjusting for the impact from movements in foreign exchange rates, consolidated revenue increased 0.6%. The 0.6% increase in adjusted consolidated revenue is due to the 8.2% growth in our Americas segment, partially offset by the 5.8% decline in International.Consolidated operating income was down 6.8% in the quarter to $47.7 million.

Adjusted consolidated OIBDAN declined 5.3% with the growth in America's offset by a decline in International, primarily due to China.Moving on to Slide 10, I will discuss Americas' results. The Americas business had a very strong quarter, with a revenue of $328.3 million, up 8.2% over the prior year.

This positive growth was driven by improvements across all of our channels, with strong growth both in national and local businesses.National, which accounts for 40% of revenues, was up 10% with growth in both digital and print.

Our national business is benefiting from the overall strength in the economy with major advertisers re-evaluating their media mix and returning to out-of-home.

The insurance sector was the largest driver of growth and is a great example of advertisers returning to the sector.We're also seeing growth from new technology-driven businesses, including food delivery services, streaming and virtual meeting services.

Local continues to deliver solid growth across our markets, increasing 7% with strength in California and the South.Total digital was up 17.6% to $104.4 million, and accounted for 32% of total revenues, benefiting from a 19.3% growth in digital and street furniture, driven by a combination of organic growth and our deployment of new digital displays.Although it is still in the early stages, we're starting to see a measurable impact from programmatic, which enables advertisers to narrowly target audiences they're looking to reach.Print revenues were up mid-single digits.

Print continues to be a viable option for advertisers given the quality of the print vinyl and our ability to develop creative and impactful visuals.Total operating expenses were up 6.6%, direct expenses were up 4.4%, primarily due to site lease expenses, including variable site lease expenses related to higher revenues.

SG&A expenses were up 12.5%, largely due to higher employee compensation expense, including variable incentive compensation.Operating income increased 18%, and OIBDAN was up 10.5% with an improvement in margins due in large part to the strong revenue growth.As we continuously evaluate our financial market communications, we've made the decision to replace our comments on pacing during the earnings conference call with an updated outlook.We are confirming the outlook we provided in August and anticipate Americas' revenues and OIBDAN to increase mid to high single digits in the second half of 2019.Since separation, we have considered alternatives to our existing non-GAAP measures that better reflect our ongoing performance and comparability to other similar companies.

With our year-end earnings release, we expect to provide annual guidance for 2020 using these new measures.On the Slide 11 and our International results. Our International business delivered mixed results during the quarter. Reported revenue was down 9.7% to $325.2 million.

Adjusting for foreign exchange, revenue declined 5.8%.We continue to experience a substantial decline in China, combined with the headwinds created by the non-renewals of the contracts in Barcelona and Rome, partially offset by increases in revenues from digital display expansion in other International markets.Given the success of our digital initiatives in multiple markets, we remain optimistic regarding the opportunities in our International business.Digital revenues in our International business increased 17.4% in the quarter as compared to the prior year and account for 27% of total revenues.

Excluding China, which has limited digital, digital revenues accounted for 32% of total revenues. In markets where we've made significant investments in digital, such as the U.K., we are seeing strong growth in revenues attributed to digital conversions.Adjusted operating expenses were down slightly, $2.1 million or 0.7%.

Adjusted direct operating expenses increased slightly with higher site lease expenses in countries experiencing revenue growth, partially offset by lower site lease expenses in Italy and Spain due to non-renewal of contracts.

Adjusted SG&A expenses were down largely due to decreased cost in Spain related to the non-renewal of contracts.The International segment generated an operating loss of $4 million in the quarter as compared to operating income in the prior year of $13.7 million.

Adjusted OIBDAN was down 37% primarily due to China.Looking ahead in our International business, excluding China and the impact of fluctuations in foreign exchange rates, we reiterate the outlook we provided in August with both revenue and OIBDAN expected to be up low single digits with seasonal strength coming in the larger and more impactful fourth quarter.Before I move on, I do want to talk about our investment in China, Clear Media, which has delivered exceptional results for a number of years.

However, starting with the fourth quarter of last year, it has experienced flat to declining revenue due to the weakness within the consumer economy in China.In the first 9 months of this year, revenues are down approximately 19%.

In order to address this, Clear Media remains focused on implementing its plans to broaden its customer base and reduce dependence on large customers from e-commerce and IT industries, while implementing cost savings initiatives given the challenging trading conditions.Clear Media recently issued a trading and business update, stating that in the absence of any significant improvement in the fourth quarter of 2019, the sales for the full year of 2019 are expected to record a double-digit decline as compared to 2018.Also taking into account the increasing costs and expenses and the adoption of Hong Kong FRS 16 for leases, the Group currently expects to record a loss for the full year 2019.Please turn to Slide 12.

Capital expenditures totaled $139.7 million year-to-date through September 30 of 2019, and we will still expect our full year CapEx to be in the range provided in August, from $225 million to $235 million.Our capital expenditures in Americas segment of $46.5 million were primarily for constructing and sustaining our billboards and other out-of-home advertising displays, including digital billboards.

In our International segment, we spent $82.7 million for constructing and sustaining our street furniture and other out-of-home advertising displays, including digital displays.The increase in CapEx was primarily attributable to Paris and the buildout of additional bus shelters in China.

Corporate CapEx primarily relates to the buildout of the new San Antonio office and IT infrastructure due to the separation from iHeartMedia.Now on to Slide 13.

Before we move to the balance sheet, I want to take a moment to review the various capital market and financing initiatives we completed during the third quarter.Through these initiatives, we have improved our balance sheet, reducing our net leverage and significantly extended our maturity profile with our next maturity in 2024 and strengthened our free cash flow generation with a $63 million reduction in cash interest payments.In July, we issued 100 million shares of common stock.

We used net proceeds from the sale to redeem approximately $333.5 million of our highest interest 9.25% notes.

This resulted in a credit upgrade, which enabled us to efficiently refinance all of our senior debt by accessing both the bank and the bond markets at more favorable rates.We then issued $1.25 billion of 5.125% senior secured notes and $2 billion of 7-year Term Loan B and redeemed the $375 million CCIBV senior notes due 2020 and the $2.7 billion senior notes due 2022.

Following the redemption of the CCIBV senior notes, we will no longer provide CCIBV financial results.Now on to Slide 14 and the balance sheet. Clear Channel Outdoor's consolidated cash and cash equivalents totaled $341.8 million as of September 30, 2019. This balance includes $130.4 million of cash held outside the U.S.

by our subsidiaries, a fortune of which is held by non-wholly owned subsidiaries or is otherwise subject to certain restrictions and not readily accessible to us.We were able to reduce total debt from $5.3 billion to $5.1 billion with the net proceeds from the capital market transactions.

Our weighted average cost of debt was 6.9% for the third quarter.Year-to-date, the cash interest payments were $293.4 million. This is higher than previous years due to timing of certain interest payments. We expect cash interest payments in 2019 to be approximately $321.8 million with fourth quarter cash interest payments of $28.4 million.

In 2020, we expect cash interest payments to be $354.3 million, an increase compared to 2019 due to the timing of cash interest payments in 2019.Before I conclude my formal remarks, I wanted to say, we're excited about the future of our business and can see a path whereby we believe the company can generate an excess of $100 million of free cash flow and have net leverage of approximately 6.5 times by the end of 2021.

We believe this is achievable through growth in the business combined with the early refinancing of our 9.25% notes, which become callable in February of 2021.Also we think it's important to provide a bit more color on how we think about available free cash flow as well as how we plan to deploy it in the future.

A substantial portion of our available cash flow after capital expenditures for sustaining our existing plant is available for redeployment, and a significant amount is currently being used and is expected to be used to invest in attractive new assets that we believe will generate significant returns for our business.Management and the Board of Directors take a disciplined approach to capital allocation as a part of an overall strategy to further strengthen our business.

While the company has significant opportunity to invest for growth, our current stock valuation is not lost on us.

And share repurchases may, at some point, represent an attractive investment alternative.We believe that when you exclude the enterprise value of our China investment, the remaining value of our businesses trade at multiples less than where our competitors trade.

We regularly evaluate all options for shareholder value creation, including investing in growth of our business and paying down debt as well as exploring other avenues of growth and value creation. I will now turn the call back to William..

Thank you, Brian.

The long-term outlook for our company is strong as we continue to lead the tech-fueled transformation of the out-of-home medium and fully capitalize on our global footprint to deliver measurable results for our advertisers through our innovative services and capabilities.The initial steps we've taken to address our capital structure and reduce our net leverage are having a positive impact as we benefit from improved cash flow and enhanced strategic flexibility.The fundamental strength of our industry combined with our strategic investment in digitization and data analytics will allow us to focus on optimizing our performance and creating enhanced value for our shareholders.We look forward to updating you on our plan and ongoing progress.

And now Scott Wells will join Brian and myself in taking your questions..

[Operator Instructions] Our first question comes from the line of Kannan Venkateshwar of Barclays..

Hi. Just a quick question. Basically, when you think about this particular quarter, it looks like there's been a lot of strength across the entire Outdoor segment, including UK's.

In terms of growth variables, if you could just help us understand how the variables this year are different versus prior years? Is there any new cohort of advertisers that you guys are seeing?And within your numbers, is there - if you could just help us think through different categories like transit, for example, and billboards, in terms of where the strength is coming from.

Thanks..

Thanks for the question. It's Scott Wells here. And I'm going to answer this from a US perspective, because I think that's what you're primarily thinking about here. But if you want us to expand internationally, I can hand it to William at the end.It has been a good year for the category.

This is something that we have spoken about for quite some time in terms of the opportunity in out-of-home. It is under-invested in as a media category within the United States relative to other markets around the world.And at least part of what's going on is money coming in reflecting that.

I think the thing that has been unique about this year, from our perspective, are that we have seen really good growth across all channels in all product lines.So you've seen the national advertisers spending more and you've also seen the local advertisers spending more. We've seen growth in billboards, we've seen growth in transit.

Digital has, obviously, been very, very strong for us across the portfolio.

And these things are being impacted by the moves that we're making that William referred to on the call, things like adding data via our RADAR tool set, things like trading programmatically.But they are also being driven by things that are happening in the larger advertising market as well as you see out-of-home getting a lot of attention from the thought leaders in media.And there was a very interesting study done by Facebook in Europe and South Africa that demonstrated the impact of adding out-of-home to a campaign, where you saw the reach of the campaign expand substantially.And when you have competitors, and we certainly think of Facebook as a competitor, putting forth studies that demonstrate the efficacy of your medium, your -- you take that seriously and you value it.So the macro, we think there's a large move toward out-of-home that's happening across a bunch of different categories.

If you drill down into it, because I know part of your question was what categories we've seen, there've been a number of things that have played out this year.

I think we've talked about insurance as a category that has, historically, been a good out-of-home advertiser, has really taken it to the next level this year.We've seen movement in technology. We've talked a lot about the fact that some of the technology companies are our biggest advertisers, and they're actually over indexed.

They spend substantially more than the average 4% of their out-of-home -- part of their media budgets on out-of-home, oftentimes up into the teens and 20s in terms of the percent of spend that they're putting forth.So technology has been a big deal. We've seen a lot of activity in food delivery this year. That's been a big deal.

So a number of things driving it, but the really great strength across the medium is just seeing it really across all the products in all the categories. Did you want us to comment on International? I'll throw it back to you..

No, my question was broadly around the U.S. numbers, because that's been a trend across all the U.S. peers as well.

I do have a follow-up on the US business though, which is on the EBITDA side, you guys are growing - I think your growth was the fastest amongst your peers.So we just - is there something you guys are doing differently versus the others? If you could just explain if it's just a function of maybe the mix? Or if there's something on the cost side? And how should we think about this going forward.

Thanks..

Sure. No, thank you for that question as well. The -- I can't really give a detailed bridge between us and our competition. But the drivers in our case -- this business has a lot of operating leverage.When you see the growth coming -- and again, I mentioned before, it's coming across all channels.

But when you see growth differentially in the digital part of it, that's a good margin business in general. It does vary depending on a lot of circumstances. But seeing strong growth in digital will typically lead to a pretty good operating leverage.I mean, frankly, it's a focus area for us.

We spend a lot of time thinking about how we keep our costs very modest and we keep our cost structure focused.

So I think -- if you heard me speak in any of the investor conferences, you'll hear me say that when we start getting up into the mid-single digits of growth, you should expect that we're going to be seeing good operating leverage in this business, it's the nature of the mix.There really wasn't anything particular about our product mix in Q3, other than that digital comment that I called out in terms of something growing substantially fast.

And in terms of moving forward, I mean, I think that we fully expect the operating leverage relationship to hold, and that as we see good growth rates at the top line, we'll see good growth rate at the bottom line..

Thank you..

Your next question comes from the line of Steven Cahall of Wells Fargo..

Thank you. Brian, maybe a couple for you.

Maybe to start off with if you think about where rates are now, what's your expectation for foreign exchange pressures next quarter -- or fourth quarter? And then at the current rate, is there a point in 2020, when these really abate or even turn into a tailwind?And then I thought your comment on the buyback or a potential buyback was interesting, so based on where the stock price is today, can you just tell us the way that the company is thinking about putting the incremental free cash flow to debt reduction versus the value of your own shares?.

Sure. On the first one, I don't have a lot for you. We don't typically comment on foreign exchange. I know it's a modeling issue. But we don't put in balance sheet hedges, and we don't provide guidance on foreign exchange.

And so perhaps offline, we can talk a little bit more about how we think about it, but it's not something we generally comment on, on the earnings call.I want to spend a little time talking about the share repurchase comment. I think we just have to think about the best return for our shareholders.

And as we look as a team across all of our investment opportunities, given where our share price currently is, it's something that has to be considered at some point.

We're not announcing the share buyback program today, we don't have one in place.But ultimately, the company and its management needs to look at all options to create shareholder value and given where our share price is today, it's certainly something that we'll have to keep our eye on going forward.So I'll leave it at that.

That's probably all I should say. Again, we have no program in place. But it's just something we're looking at and something we have to compare and then use as a benchmark against all the other investments we're making..

And then maybe just a quick follow-up for Scott, you all talked a lot about the pie growing in Outdoor as a channel versus your share of the pie.

So between what's going on with digital and RADAR versus just market share shift, how do we, kind of, characterize the strong growth you've had this year, between those two buckets?.

Sure.

I mean, I think that if you look at the year-to-date, and certainly nobody has reported on Q3 yet, we've been growing just a little bit faster than the market as a whole.But the market is pretty broadly defined in that it includes very small screens in place spaced all the way through our large roadside format, so it's a diverse mix of products that goes in there.

But we've been growing faster than the market by a little bit, in that regard.So that is a part of it. I think the drivers underneath that come down to our investment policy, the places that we're doing digital conversions, the new airports that we're picking up, things along those lines.

Those have contributed.This has not been a particularly big year in incremental inventory.

But we have been steadily adding capacity through our digital conversion plans, and we feel good that we're choosing strong locations to do that.And I do think that the programmatic and RADAR investments are things that are helping us in gathering share as it goes. So it's a blend of things that are pure market-driven versus initiatives.

Does that answer your question?.

That does. Thank you very much..

Your next question comes from the line of Lance Vitanza of Cowen..

Hi, guys. Thanks for taking the questions. I guess, first I wanted to ask you on the corporate expense. It came in about $5 million higher than we had modeled. And in fact, it was up a little bit year-over-year.

Given that the ending of the royalty payment, we'd expected corporate expense would be down year-over-year.I'm just wondering if 3Q was a blip or are we just fundamentally misunderstanding something and need to adjust our thinking going forward?.

I don't know that I'd call it a blip. It did have a significant amount of separation costs. I'd call it around $5 million. Maybe something that, I hate to say, not recurring, but it's something that won't continue to exist forever are some significant investigation costs. We've incurred some costs as it relates to operations in China.

We have incurred some costs as it relates to Italy. As those close out, those will go away. They are about $4 million.So I think if that is helpful to you that may account for some of the differences. Ultimately, we'll wind up those investigations and those costs will go away. But we have a significant amount impact to corporate expense this quarter..

Very helpful. And, I mean, if I could, just a follow-up.

Can you just comment, Brian, further on the new metrics that you plan to feature beginning with the fiscal -- with the 2020 guidance?.

Yes. We haven't finalized the decision at this time, but we have looked at what our competitors provide and what would be most useful to the investment community.

So I would expect beginning in Q4, we'll have some version of a free cash flow metric along with some type of adjusted EBITDA figure that's more helpful, I think, to the investment community..

Okay. And then just to clarify, last for me.

Just could you clarify the comment you made regarding free cash flow of $100 million and leverage down to 6.5x by 2021? And I don't remember exactly how you phrased it, was that by the end of 2021?.

That's correct..

And does that comment the end of '21 refer only to the 6.5x leverage? Or also building to the $100 million of free cash flow?.

It's both.

I think yes, as we continue to invest in accretive assets and continue to grow this business organically that if we operate to plan, and we are successful in refinancing the 9.25% notes, which are callable in February of 2021, that we can reach a free cash flow number in the $100 million range and have leverage down to 6.5 times by the end of 2021..

Okay. Thanks, guys. Appreciate it..

Your next question comes from the line of Marci Ryvicker of Wolfe Research..

Good morning. It's Stephan on for Marci.

I was hoping you might be able to give us a little bit more color on International regions, excluding China, are things typically getting better or worse, anything standing out, in particular?.

Yes. Thanks for that. I mean apart from China, I think we had a good quarter in International. We saw excellent growth in the U.K., good growth in a number of other European markets, and a very strong performance in Latin America as well.

I mean across Europe, I would say, we feel particularly good as we go into 2020.And we see the Paris contract coming online from the end of this year and very strong plans for the International business, particularly in Europe for 2020 and beyond.

So it's really -- it's the China issue that is affecting and impacting on the overall International position as we stated in the statement..

Understood.

And I was wondering if you could put a little bit of a finer point on the guidance for Q4 in Americas? I know mid-single digits to high single digits for the second half, but given the Q3 results that kind of leads us anywhere from, kind of, low single digits to high single digits on a revenue line, and a little bit of deceleration on OIBDAN.

Is there any additional color you could give us there for the fourth quarter?.

Yes. I don't know that I want to give a whole lot of additional color on the guidance that we were thoughtful about providing and then affirming. The comps, for the U.S. business in particular, get tougher in the fourth quarter. But I think we hold to our guidance. And if anything, feel more strongly given the range that we provided..

Great. Thanks so much..

Your next question comes from the line of Jim Goss of Barrington Research..

Thanks. One thing you brought up was the San Jose all-digital airport. I wondered if you could go into that a little bit more.

Is this a potential template for testing? Or are you consolidating previously tested concepts? And how broadly do you roll this out into other areas?.

Thanks, Jim. It's Scott here. I'll take that one. This program is definitely new to the world on a few levels. I mean, first off, it's 100% digital. Second off, we've gone with a sponsorship model essentially where there are an acre advertisers that committed to be part of the program as we were developing the program.

And it was done in conjunction with very strong partnership with the airport.I think there are number of things unique about San Jose that makes it a really good fit in terms of its locations in the tech community, the nature of how the airport flows in that they have a very centralized security.

So lots of good flow characteristics as you think about places where advertising can be placed effectively.And it was -- again, it was a partnership that would not have been possible without the vision and ideas of the San Jose team and the airport operating team as well as our team working together to develop it.

I do think it's something that we will consider rolling out in other geographies.But I don't think you should think that this is what our airports model shifts to 100%, just given some of the characteristics of the physical plant in San Jose and also the nature of the advertiser base in the sort of areas surrounding San Jose.

Hopefully, that gives you some color on it, Jim..

Yes. And it does sound more unique to that area. Although one -- I have another, sort of, question, but one related to that potentially. You also talked about doing more with the movie industry.

And I wondered if in the areas where you can add full motion video, say, in a fixed location like with the theatrical sector or the studios provide movie trailers or even trailers adapted to a specific location as one of the areas where that might be another opportunity for you?.

Yes. I mean our asset base that can do full motion video is fairly limited. Airports is definitely one of the areas where it fits.

I mean, I think, with that category of advertiser, like all advertisers, they're trying to hit the sweet spot between how the assets overlap with their audience and how the use case fits.They have a variety of places where they're able to do the, sort of, trailer-type advertisement, and we've certainly done that in places like Times Square.

I'm not sure if airports would be a priority area for them, but it's a possibility..

Okay. And one other area. It sounds like the -- mostly the compression in the International sector margin related to China. And you talked about value-creation priorities.

I wonder if that also includes considering divesting the China position? I think we've talked about this in the past.And I understand it's a large and growing market, but is the combination of a large, fully consolidated exposure but potentially less control on your part, especially in the challenging environment, the type of fit you really want to have?.

Yes. I mean we're, obviously, looking very hard at the China business. At the moment, it's no secret that the China economy is going through a bit of a readjustment at the moment. And GDP was the slowest for 30 years last quarter.So we're looking closely at our investments in China and looking at every option going forward, but no news at the moment..

Okay, thanks very much..

That was our final question for today. I will now return the call to management for any additional or closing comments..

Okay. Thank you very much, and thank you everybody for joining. Obviously, 2019 was a very important transition year for this business.

As I said at the start of the call, we have very exciting plans for 2020 and beyond, which we'll be talking about on our next call as we give you guidance for 2020, when we get onto the Q4 earnings call early next year.So we remain absolutely focused on delivering shareholder value in 2020 and beyond, and we look forward very much to you joining us on the next call.

Thanks very much, everybody..

Thank you for participating in the 2019 third quarter earnings conference call for Clear Channel Outdoor Holdings, Inc. You may now disconnect your lines and have a wonderful day..