Clear Channel Outdoor Holdings Inc

RESULTS OF OPERATIONS

The discussion of our results of operations is presented on both a consolidated and segment basis.

•Our operating segment profit measure is Segment Adjusted EBITDA, which is calculated as revenue less direct operating expenses and selling, general and administrative expenses, excluding restructuring and other costs, which are defined as costs associated with cost-saving initiatives such as severance, consulting and termination costs and other special costs. The material components of Segment Adjusted EBITDA from continuing operations are discussed below on both a consolidated and segment basis.

•Corporate expenses, depreciation and amortization, impairment charges, other operating income and expense, all non-operating income and expenses, and income taxes are managed on a consolidated company basis and are, therefore, included only in our discussion of consolidated results of continuing operations.

•Results of discontinued operations are presented and discussed below separately from results of continuing operations.

Revenue and expenses “excluding the impact of movements in foreign exchange rates” are presented in this MD&A because Company management believes that viewing certain financial results without the impact of fluctuations in foreign currency rates facilitates period-to-period comparisons of business performance and provides useful information to investors. Revenue and expenses “excluding the impact of movements in foreign exchange rates” are calculated by converting the current period’s revenue and expenses in local currency to U.S. dollars using average monthly foreign exchange rates for the same period of the prior year.

Consolidated Results of Continuing Operations

Consolidated Revenue

Our revenue is derived from selling advertising on the out-of-home displays we own or operate, consisting of roadside billboards, urban street furniture, airport advertising displays and other displays. Our asset portfolio consists of both print displays and digital displays.

Consolidated revenue increased $113.1 million, or 5.6%, during 2023 compared to 2022. Excluding the $6.3 million impact of movements in foreign exchange rates, consolidated revenue increased $106.8 million, or 5.3%. Higher revenue in our Airports and Europe-North segments driven by increased demand, continued investment in digital infrastructure and new contracts was partially offset by lower revenue in our America segment driven by weaknesses in the San Francisco/Bay Area market and the Media/Entertainment vertical.

Consolidated revenue increased $245.3 million, or 13.9%, during 2022 compared to 2021. Excluding the $76.9 million impact of movements in foreign exchange rates, consolidated revenue increased $322.2 million, or 18.2%. As we continued to recover from the adverse effects of COVID-19, we saw increases in revenue across our portfolio. Excluding the impact of movements in foreign exchange rates, 2022 revenue exceeded 2019 (pre-COVID-19 levels) in our America, Airports and Europe-North segments.

The following tables provides information about consolidated digital revenue:

(1)Amounts excluding movements in foreign exchange rates have been calculated by converting the latest period’s results in local currency to U.S. dollars using average monthly foreign exchange rates for the prior year.

Consolidated Direct Operating Expenses

The largest component of our direct operating expenses is site lease expense, which includes rent expense on both lease and non-lease contracts and consists of payments for land or space used by our advertising displays, including minimum guaranteed payments and revenue-sharing arrangements. Direct operating expenses also include production, installation and maintenance expenses related to the printing, transporting, posting and maintaining of advertising copy, as well as costs to operate our out-of-home displays, such as electricity costs for digital displays, repair and maintenance costs, and employee-related costs for our real estate and operations functions.

Consolidated direct operating expenses increased $110.7 million, or 11.3%, during 2023 compared to 2022. Excluding the $0.1 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $110.8 million, or 11.3%, mainly due to higher site lease expense, driven by higher revenue, lower rent abatements, and new and amended contracts, as well as higher compensation costs.

Consolidated direct operating expenses increased $94.9 million, or 10.7%, during 2022 compared to 2021. Excluding the $47.6 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $142.6 million, or 16.1%, primarily due to higher site lease expense driven by higher revenue and lower rent abatements. We also incurred higher production and installation expenses driven by increased sales activity.

The following table provides additional information about certain drivers of consolidated direct operating expenses:

(1)Amounts excluding movements in foreign exchange rates have been calculated by converting the latest period’s results in local currency to U.S. dollars using average monthly foreign exchange rates for the prior year.

Consolidated Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses primarily consist of employee-related costs for our sales, marketing, and segment leadership and support functions, as well as marketing costs, facilities and information technology costs, and other general costs.

Consolidated SG&A expenses increased $14.1 million, or 3.9%, during 2023 compared to 2022. Excluding the $1.9 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $12.2 million, or 3.4%, largely due to higher employee compensation.

Consolidated SG&A expenses increased $28.0 million, or 8.5%, during 2022 compared to 2021. Excluding the $13.7 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $41.7 million, or 12.6%, due to higher employee compensation costs, driven by improvements in operating performance and increased headcount, and higher credit loss expense, driven by an increase in current year revenue and prior year credit loss reductions due to COVID-19 recovery.

The following table provides the restructuring and other costs included within consolidated SG&A expenses:

Corporate Expenses

Corporate expenses primarily consist of infrastructure and support costs related to our information technology, human resources, legal, finance, business services and administrative functions, as well as overall executive leadership.

Corporate expenses increased $10.5 million, or 6.5%, during 2023 compared to 2022. Excluding the $0.2 million impact of movements in foreign exchange rates, corporate expenses increased $10.3 million, or 6.3%, primarily driven by legal liabilities recorded for the resolution of the investigation of the Company’s former indirect, non-wholly-owned subsidiary, Clear Media. Such expenses are included in restructuring and other costs in the table below. Please refer to Note 8 to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional details.

Corporate expenses increased $3.6 million, or 2.3%, during 2022 compared to 2021. Excluding the $2.6 million impact of movements in foreign exchange rates, corporate expenses increased $6.2 million, or 3.9%, primarily due to higher employee compensation and travel costs, partially offset by lower professional fees.

The following table provides additional information about certain drivers of corporate expenses:

(1)Excludes share-based compensation expense for employees of discontinued operations for all periods presented.

(2)Restructuring and other costs during the years ended December 31, 2023 and 2022 include expenses of $19.0 million and $7.1 million, respectively, recorded for the resolution of the investigation of Clear Media.

Depreciation and Amortization

Depreciation and amortization expense includes depreciation of our advertising structures and other property, plant and equipment and amortization of our finite-lived intangible assets.

Depreciation and amortization increased $24.0 million, or 11.0%, during 2023 compared to 2022. Excluding the $0.5 million impact of movements in foreign exchange rates, depreciation and amortization increased $23.4 million, or 10.8%. Depreciation and amortization increased $4.7 million, or 2.2%, during 2022 compared to 2021. Excluding the $4.8 million impact of movements in foreign exchange rates, depreciation and amortization increased $9.5 million, or 4.5%.

These increases were primarily driven by a change in the classification of billboard permit intangible assets in our America segment from indefinite-lived to finite-lived in the fourth quarter of 2022, which resulted in increases in amortization expense of $48.2 million and $16.1 million during 2023 and 2022, respectively, compared to the prior years. This was partially offset by the impact of other assets becoming fully depreciated. Please refer to Note 2 in Item 8 of this Annual Report on Form 10-K for additional details regarding this change in permit classification.

Impairment Charges

We did not recognize any impairment charges during 2023. During 2022, we recognized impairment charges of $22.7 million in our America segment, including $21.8 million on indefinite-lived permits, driven by rising interest rates and inflation, and $0.9 million on permanent easements as a result of our annual impairment test. During 2021, we recognized an impairment charge of $119.0 million in our America segment related to permits, driven by an increase in the discount rate and reduction in projected cash flows related to the negative impacts of COVID-19.

Other Operating Expense, Net

Other operating expense, net, of $11.8 million, $2.1 million and $3.0 million during 2023,2022 and 2021, respectively, were mainly driven by costs related to the strategic reviews of our businesses. In 2022, these costs were largely offset by compensation received from local governments for the condemnation and removal of billboards, less a reduction in the underlying value of the condemned assets, in certain markets in our America segment.

Interest Expense, Net

Interest expense, net, increased $60.8 million in 2023 compared to 2022 driven by higher interest rates on our Term Loan Facility, a portion of which was refinanced with the CCOH 9.000% Senior Secured Notes in August 2023.

Interest expense, net, increased $11.6 million in 2022 compared to 2021 driven by higher interest on our Term Loan Facility. This was partially offset by lower interest rates as a result of refinancing the Clear Channel Worldwide Holdings 9.25% Senior Notes due 2024 (the “CCWH Senior Notes”) in the first half of 2021 and, to a lesser extent, repayment of the $130.0 million draw under our Revolving Credit Facility in the fourth quarter of 2021.

Gain (Loss) on Extinguishment of Debt

In 2023, we recognized a gain on extinguishment of debt of $3.8 million primarily related to the open market repurchase of $15.0 million principal amount of CCOH Senior Notes at a discount. We did not extinguish any debt during 2022. In 2021, we recognized losses on extinguishment of debt of $102.8 million related to the redemption of the CCWH Senior Notes.

Other Income (Expense), Net

Other income, net, of $6.4 million in 2023 and other expense, net, of $37.1 million and $1.6 million in 2022 and 2021, respectively, primarily resulted from net foreign exchange gains and losses recognized in connection with intercompany notes denominated in a currency other than the functional currency, driven by fluctuations in the value of the U.S. dollar against foreign currencies. During 2022, the U.S. dollar significantly strengthened against the Euro and British pound sterling, resulting in a large net foreign exchange loss in that year. The U.S. dollar has since trended weaker, resulting in a net foreign exchange gain in 2023. This was partially offset by expenses related to the CCOH 9.000% Senior Secured Notes issuance and Term Loan Facility prepayment in the third quarter of 2023.

Income Tax Benefit Attributable to Continuing Operations

The effective tax rates for continuing operations were 9.9%, 63.0% and 9.2% in 2023, 2022 and 2021, respectively. The benefit we received from reporting tax losses was partially offset by valuation allowances recorded against current period deferred tax assets resulting from losses and interest expense carryforwards due to uncertainty regarding our ability to realize those assets in future periods. In 2022, however, we received an additional tax benefit driven by a reduction in the valuation allowance related to the classification change of permit intangible assets from indefinite-lived to finite-lived for financial reporting purposes. For a full reconciliation of our effective tax rate to statutory rates and further explanation of our provision for taxes, please refer to Note 9 to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

America Results of Operations

America Revenue

America revenue decreased $4.7 million, or 0.4%, during 2023 compared to 2022 mainly driven by weakness in the San Francisco/Bay Area market. Additionally, we saw a decrease in sales for the Media/Entertainment vertical driven by the Hollywood labor union strikes. These negative impacts were largely offset by higher revenue from various other markets and verticals. The net decrease in America revenue was driven by lower revenue from street furniture and transit displays, partially offset by higher revenue from billboards. As shown in the table below, digital revenue increased 2.0% from 2022.

America revenue increased $92.3 million, or 9.1%, during 2022 compared to 2021. During 2021, America revenue was still adversely affected by COVID-19. However, as our America segment recovered, we saw increases in revenue across all of our products, most notably billboards, and in almost all of our markets. More than half of the total increase was driven by digital revenue, which increased 15.2% from 2021.

The following table provides information about America digital revenue:

Revenue generated from national sales comprised 34.7%, 36.2% and 39.1% of America revenue for 2023, 2022, and 2021, respectively, while the remainder of revenue was generated from local sales.

America Direct Operating Expenses

America direct operating expenses increased $25.6 million, or 6.2%, during 2023 compared to 2022 primarily due to higher site lease expense driven by lease renewals and amendments, including the renegotiation of a large existing site lease contract, and lower rent abatements.

America direct operating expenses increased $35.4 million, or 9.4%, during 2022 compared to 2021 primarily due to higher site lease expense driven by higher revenue, new contracts and lower rent abatements.

The following table provides information about America site lease expense and rent abatements:

America SG&A Expenses

America SG&A expenses decreased $0.2 million, or 0.1%, during 2023 compared to 2022 driven by a property tax refund of $4.7 million resulting from a legal settlement. This was offset by higher employee compensation, marketing and information technology costs.

America SG&A expenses increased $19.8 million, or 11.3%, during 2022 compared to 2021 largely due to higher credit loss expense, driven by an increase in current year revenue and prior year credit loss reductions due to COVID-19 recovery, and higher employee compensation costs, driven by increased headcount and sales commissions.

Airports Results of Operations

Airports Revenue

Airports revenue increased $55.2 million, or 21.5%, during 2023 compared to 2022 and $96.1 million, or 59.9%, during 2022 compared to 2021.

During 2021, Airports revenue was adversely affected by COVID-19 as U.S. airport traffic was still well below pre-pandemic levels. As the travel industry continued to recover, with U.S. airport traffic increasing in 2022 and returning to pre-pandemic levels in 2023, demand for airport advertising also increased.

Airports revenue has benefited from our continued investment in digital media infrastructure, most notably related to our advertising sponsorship contract with the Port Authority of New York and New Jersey. The following table provides information about Airports digital revenue:

Revenue generated from national sales comprised 58.8%, 53.7% and 42.9% of Airports revenue for 2023, 2022 and 2021, respectively, while the remainder of revenue was generated from local sales.

Airports Direct Operating Expenses

Airports direct operating expenses increased $44.8 million, or 27.4%, during 2023 compared to 2022 and $65.1 million, or 66.0%, during 2022 compared to 2021 primarily due to higher site lease expense driven by higher revenue and, to a lesser extent, lower rent abatements.

The following table provides additional information about Airports site lease expense and rent abatements:

Airports SG&A Expenses

Airports SG&A expenses increased $3.0 million, or 9.5%, during 2023 compared to 2022 and $7.0 million, or 28.1%, during 2022 compared to 2021 largely due to higher employee compensation costs driven by higher sales commissions and increased headcount.

Europe-North Results of Operations

Europe-North Revenue

Europe-North revenue increased $53.4 million, or 9.4%, during 2023 compared to 2022. Excluding the $0.8 million impact of movements in foreign exchange rates, Europe-North revenue increased $52.6 million, or 9.3%. We saw increases in revenue across our products, most notably street furniture, and in most of the countries in which we operate, most notably the U.K. and Belgium, driven by increased demand, the deployment of additional digital displays and new contracts. A large portion of the total increase was driven by digital revenue, which increased 13.0% from 2022, or 12.3% excluding the impact of movements in foreign exchange rates, due in part to programmatic growth.

Europe-North revenue increased $48.1 million, or 9.3%, during 2022 compared to 2021. Excluding the $76.1 million impact of movements in foreign exchange rates, Europe-North revenue increased $124.2 million, or 24.0%. While 2021 revenues were still negatively impacted by COVID-19 in most countries, in 2022 we experienced incremental growth compared to 2019 (pre-COVID-19) revenue levels. We saw year-over-year increases in revenue across our products, most notably transit and street furniture, and in almost all of the countries in which we operate, with the largest increases in Sweden, the U.K. and Norway. A large portion of the total increase was driven by digital revenue, which increased 19.4% from 2021, or 35.0% excluding the impact of movements in foreign exchange rates.

The following table provides information about Europe-North digital revenue:

(1)Amounts excluding movements in foreign exchange rates have been calculated by converting the latest period’s results in local currency to U.S. dollars using average monthly foreign exchange rates for the prior year.

Europe-North Direct Operating Expenses

Europe-North direct operating expenses increased $37.1 million, or 10.4%, during 2023 compared to 2022. Excluding the $2.6 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $39.8 million, or 11.1%, most notably due to higher site lease expense driven by higher revenue. We also saw an increase in compensation expense driven by higher labor costs and increased sales activity.

Europe-North direct operating expenses decreased $7.5 million, or 2.1%, during 2022 compared to 2021. Excluding the $46.7 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $39.2 million, or 10.7%, due to higher site lease expense largely driven by higher revenue. We also experienced higher production and installation expenses driven by increased sales activity, as well as higher maintenance expense.

The following table provides information about Europe-North site lease expense and rent abatements:

(1)Amounts excluding movements in foreign exchange rates have been calculated by converting the latest period’s results in local currency to U.S. dollars using average monthly foreign exchange rates for the prior year.

Europe-North SG&A Expenses

Europe-North SG&A expenses increased $7.2 million, or 6.9%, during 2023 compared to 2022. Excluding the $0.3 million impact of movements in foreign exchange rates, Europe-North SG&A expenses increased $6.9 million, or 6.6%, largely driven by higher legal and facilities costs.

Europe-North SG&A expenses increased $1.7 million, or 1.6%, during 2022 compared to 2021. Excluding the $13.5 million impact of movements in foreign exchange rates, Europe-North SG&A expenses increased $15.2 million, or 14.8%, largely due to higher employee compensation costs driven by improvements in operating performance.

Other Results of Operations

Other Revenue

Other revenue increased $9.2 million, or 10.7%, during 2023 compared to 2022. Excluding the $5.5 million impact of movements in foreign exchange rates, Other revenue increased $3.7 million, or 4.3%, as higher advertising revenue was partially offset by the termination of a public bicycle rental program in Latin America.

Other revenue increased $8.8 million, or 11.4%, during 2022 compared to 2021. Excluding the $0.8 million impact of movements in foreign exchange rates, Other revenue increased $9.6 million, or 12.5%, driven by our continued recovery from COVID-19.

Revenue and the scale of the Company’s business in Singapore will be reduced in 2024 due to the loss of a contract, which terminated on December 31, 2023.

Other Direct Operating Expenses

Other direct operating expenses increased $3.2 million, or 6.7%, during 2023 compared to 2022. Excluding the $2.5 million impact of movements in foreign exchange rates, Other direct operating expenses increased $0.7 million, or 1.4%, as higher site lease expense was largely offset by lower expenses related to the termination of a public bicycle rental program in Latin America.

Other direct operating expenses increased $2.0 million, or 4.3%, during 2022 compared to 2021. Excluding the $0.9 million impact of movements in foreign exchange rates, Other direct operating expenses increased $2.8 million, or 6.2%, driven by higher site lease expense related to higher revenue.

Other SG&A Expenses

Other SG&A expenses increased $3.9 million, or 15.2%, during 2023 compared to 2022. Excluding the $1.6 million impact of movements in foreign exchange rates, Other SG&A expenses increased $2.3 million, or 9.0%, as higher employee compensation costs were partially offset by lower expenses related to the termination of a public bicycle rental program in Latin America.

Other SG&A expenses decreased $0.5 million, or 1.9%, during 2022 compared to 2021. Excluding the $0.2 million impact of movements in foreign exchange rates, Other SG&A expenses decreased $0.3 million, or 1.1%.

Loss from Discontinued Operations

Loss from discontinued operations of $151.7 million during 2023 was driven by a loss on the sale of our former business in France of $212.0 million, partially offset by gains on the sales of our former businesses in Switzerland and Italy of $96.4 million and $11.2 million, respectively. Loss from discontinued operations also reflects the net loss collectively generated during the year by operations in Spain and in Switzerland, Italy and France through their sale dates of March 31, 2023, May 31, 2023, and October 31, 2023, respectively, as well as income tax expense related to the sale of our former business in Switzerland.

Loss from discontinued operations of $47.1 million and $75.0 million during 2022 and 2021, respectively, reflects the net loss collectively generated by operations of our Europe-South segment during these respective years. The year-over-year decrease in net loss was primarily driven by the segment’s continued recovery from the adverse effects of COVID-19.

For additional details about the major classes of line items constituting loss from discontinued operations, please refer to Note 3 to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.