Clear Channel Outdoor Holdings Inc

Liquidity Analysis

Short-Term Liquidity

Our main cash requirements are for working capital used to fund the operations of the business, capital expenditures and debt service. We typically meet these requirements with cash on hand, internally-generated cash flow from operations and, if necessary, borrowings under our credit facilities. We believe that our current sources of funds will be sufficient to meet our cash requirements for at least the next 12 months.

Long-Term Liquidity

Our long-term future cash requirements will depend on many factors, including the growth of our business, investments in digital conversions and new technologies, and the pursuit and outcome of strategic transactions, including the outcome of the ongoing processes to sell the businesses in our Europe-North segment and in Latin America. In addition, we have long-term cash requirements related to the repayment of our outstanding debt, which is scheduled to mature over the next six years. We believe that our sources of funds will be adequate to meet our cash requirements in the long-term.

However, our ability to meet these cash requirements through cash from operations will depend on our future operating results and financial performance, which are subject to significant uncertainty and may be affected by events beyond our control, including macro-economic events that may result in weakness globally or in certain specific markets, higher interest rates, currency fluctuations, and geopolitical events such as the Russia-Ukraine war and the Israel-Hamas war. Please refer to Item 7A of this Annual Report on Form 10-K for additional details about our market risks. Additionally, our significant interest payment obligations reduce our financial flexibility, make us more vulnerable to changes in operating performance and economic downturns generally, and reduce our liquidity over time.

We regularly consider, and enter into discussions with our lenders and other parties related to, potential financing alternatives. In the future, we may need to obtain supplemental liquidity through additional financing from banks or other lenders; public offerings or private placements of debt, equity or equity-linked securities; strategic relationships or other arrangements; or from a combination of these sources. In addition, from time to time, we have explored, and expect to continue to explore, a variety of transactions to improve our liquidity and/or to refinance our indebtedness. However, there can be no assurance that financing alternatives or liquidity-generating or debt-refinancing transactions will be available in sufficient amounts or on terms acceptable to us in the future due to market conditions, our financial condition, our liquidity constraints or other factors, many of which are beyond our control. Even if financing alternatives are available, we may not find them suitable or at reasonable interest rates, and the terms of our existing or future debt agreements may restrict us from securing financing on terms that are available to us at that time or at all.

If we are unable to generate sufficient cash through our operations or obtain sources of supplemental liquidity as needed, we could face substantial liquidity problems, which could have a material adverse effect on our financial condition and on our ability to meet our obligations.

We and our subsidiaries have repurchased, and in the future may repurchase from time to time as part of various financing and investment strategies, outstanding notes in open market purchases, privately negotiated transactions or otherwise. These repurchases, if any, could have a material impact on our liquidity or on our results of operations. Such repurchases could also result in changes in our leverage or other financial ratios, which could have a material impact on our ability to comply with the covenants contained in our debt agreements. These transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material.

Cash Requirements

Working Capital Needs

We utilize working capital to fund the operations of our business and have certain related contractual obligations, including commitments under site leases and other non-cancelable contracts.

Site Lease Expense

One of our largest cash requirements is for site lease costs, which includes payments for land or space used by our advertising displays for both lease and non-lease contracts, including minimum guaranteed payments and revenue-sharing arrangements. We lease the majority of the land occupied by our billboard structures under long-term site leases that typically have initial terms of up to 20 years. Additionally, most of our street furniture, airport and other displays are operated through long-term contracts, many of which contain rent provisions that are calculated as the greater of a percentage of the relevant advertising revenue or a specified guaranteed minimum annual payment. Many of our lease agreements contain renewal options and annual rent escalation clauses.

In 2023, 2022 and 2021, we incurred site lease expense for our continuing operations of $809.0 million, $720.5 million and $615.3 million, respectively, which are included within direct operating expenses on our Consolidated Statements of Loss. In order to better align fixed site lease expense with the reductions in revenue we experienced due to COVID-19, we successfully renegotiated contracts with landlords and municipalities throughout our business. In 2023, 2022 and 2021, we reduced our site lease expense for continuing operations by rent abatements of $26.0 million, $51.3 million and $77.0 million, respectively. As our business has generally recovered from the effects of COVID-19, we expect rent abatements to continue to decline in future periods.

As of December 31, 2023, we had short-term future cash obligations related to site lease expense under non-cancelable operating leases and other non-cancelable contracts of $487.1 million (excluding obligations related to our business in Spain, which is discontinued operations) to be paid in the next 12 months. Please refer to Notes 7 and 8 to our Consolidated Financial Statements located in Item 8 of this Annual Report on Form 10-K for our total future cash obligations under these contracts, including schedules of future minimum payments.

Other

As previously disclosed, we engaged with the SEC and the DOJ regarding the resolution of the investigation of our former indirect, non-wholly-owned subsidiary, Clear Media. In September 2023, without admitting or denying the underlying allegations, we reached a settlement with the SEC in which we agreed to pay a total of approximately $26.1 million to the SEC in a series of installments over the next year, of which approximately $13 million was paid in October 2023. We expect to make the remaining payments in the third quarter of 2024. Please refer to Note 8 to our Consolidated Financial Statements located in Item 8 of this Annual Report on Form 10-K for more information.

Capital Expenditures and Asset Acquisitions

Our capital expenditures primarily relate to construction and sustaining activities for our out-of-home advertising displays. The primary driver of our capital expenditure requirements is the construction of new advertising structures, including the continued deployment of digital displays in accordance with our long-term strategy to digitize our network. We believe our cash flow from operations will generally be sufficient to fund these expenditures.

We made the following capital expenditures in 2023, 2022 and 2021:

(1)In 2021, we reduced capital expenditures in our America and Airports segments given the adverse financial impacts and economic uncertainty resulting from COVID-19. As our business recovered and our operating performance improved, we increased our investment in these segments through capital expenditures and asset acquisitions.

(2)In addition to payments that occurred during the period for capital expenditures, we had $14.7 million, $20.3 million and $19.0 million of accrued capital expenditures related to continuing operations that remained unpaid as of December 31, 2023, 2022 and 2021 respectively, and $1.5 million, $5.8 million and $8.3 million of accrued capital expenditures related to discontinued operations that remained unpaid as of December 31, 2023, 2022 and 2021, respectively.

(3)Excludes asset acquisitions.

During 2023, 2022 and 2021, we completed certain acquisitions of out-of-home advertising assets for total cash consideration of $12.1 million, $62.0 million and $18.5 million, respectively. These asset acquisitions included billboard structures, land, permits and permanent easements.

As of December 31, 2023, we had short-term future capital expenditure commitmentsof $51.4 million to be paid in the next 12 months related to certain transit and street furniture contracts that require minimum purchases of property, plant and equipment, as well as certain contracts that contain penalties for not fulfilling our commitments related to our obligations to build bus stops, kiosks and other public amenities or advertising structures. Please refer to Note 8 to our Consolidated Financial Statements located in Item 8 of this Annual Report on Form 10-K for our total future capital expenditure commitments, including a schedule of future minimum payments.

Debt Service Obligations

A substantial amount of our cash requirements is for debt service obligations. In 2023, 2022 and 2021, we paid interest of $404.4 million, $341.4 million and $387.6 million, respectively, with the increase driven by higher interest rates on our Term Loan Facility. In 2022, the adverse impact of rising interest rates was offset by the benefit realized from refinancing the CCWH 9.25% Senior Notes with the CCOH 7.75% and 7.5% Senior Notes in 2021.

We anticipate having cash interest payment obligations of approximately $448 million in 2024 and $408 million in 2025, assuming that we do not refinance or incur additional debt. The expected increase in cash interest payments in 2024 is largely due to differences in the timing of interest payments between the newly-issued CCOH 9.000% Senior Secured Notes and the refinanced portion of the Term Loan.

In accordance with the terms of the Senior Secured Credit Agreement, we were historically required to make principal payments on the Term Loan Facility of $5.0 million quarterly and, accordingly, made $10.0 million of such principal payments during the first half of 2023 and $20.0 million of such principal payments during each of 2022 and 2021. However, the remaining quarterly payment obligations under the Senior Secured Credit Agreement were satisfied by a prepayment that we made on the Term Loan Facility in August 2023, as described in the below “Debt Activity” section of this MD&A. As such, the remaining principal outstanding on the Term Loan is due at maturity in 2026.

Our next debt maturity is in August 2025 when the CCIBV Senior Secured Notes become due. Please refer to Note 6 to our Consolidated Financial Statements located in Item 8 of this Annual Report on Form 10-K for additional details on our outstanding long-term debt, including a schedule of future maturities.

Sources of Capital and Liquidity

Cash On Hand

As of December 31, 2023, we had $251.7 million of cash on our balance sheet, including $84.3 million of cash held outside the U.S. by our subsidiaries (excludes cash held by our business in Spain, which is discontinued operations). Excess cash from our foreign operations may generally be transferred to our operations in the U.S. if needed, subject to the foreseeable cash needs of our foreign operations and restrictions in the indenture governing the CCIBV Senior Secured Notes. In accordance with these restrictions, cash proceeds from the sale of our former business in Switzerland is being reinvested in our European businesses or otherwise used in the manner set forth in the indenture. We could presently repatriate other excess cash with minimal U.S. tax consequences, as calculated for tax law purposes, and dividend distributions from our international subsidiaries may not result in a U.S. federal income tax liability.

Cash Flow from Operations

Net cash provided by operating activities primarily results from cash collected from customers for our out-of-home advertising services, offset by cash payments made for site leases; production, installation and maintenance costs; employee compensation; marketing, facility and information technology costs; interest on our debt; taxes; and other general corporate expenditures.

In 2023, net cash provided by operating activities was $31.3 million. Cash collections from customers exceeded aggregate cash payments to vendors, lessors, employees and lenders, but to a much lesser extent than in the prior year primarily driven by higher cash paid for interest and higher payments for site lease and other direct operating expenses. Additionally, we paid approximately $13 million to the SEC in 2023 related to the resolution of the Clear Media matter, as previously described.

In 2022, net cash provided by operating activities was $140.0 million. The return to positive operating cash flows was driven by strong cash collections from customers due to improvements in revenue and our continued recovery from COVID-19, which more than offset increased cash payments driven by higher site lease, employee compensation and other costs. Additionally, cash paid for interest was lower than interest paid in 2021 primarily due to the refinancing of the CCWH Senior Notes, as previously described.

In 2021, net cash used for operating activities was $133.5 million as cash paid for interest in this period exceeded other net cash inflows from operations, which were still negatively impacted by COVID-19. While cash collections from customers exceeded cash payments to vendors, lessors and our employees, collections earlier in the period lagged primarily due to COVID-19’s impact on fourth quarter 2020 and first quarter 2021 sales. Additionally, cash payments during the period included the payment of site lease costs that were deferred from 2020 in response to COVID-19.

Dispositions

In 2023, we received net cash proceeds from the disposition of businesses and assets of $59.8 million. This includes $84.9 million and $4.3 million of proceeds, net of direct costs to transact the sales and cash sold, from the sales of our former businesses in Switzerland and Italy, respectively, partially offset by$43.0 million of net cash delivered to the buyer and payment of direct costs to transact the sale of our former business in France. The remaining cash proceeds relate to the disposition of assets.

In 2022, we received cash proceeds from the disposition of assets of $27.1 million, including compensation received from local governments for the condemnation and removal of billboards in certain markets in our America segment. In 2021, cash proceeds from the disposition of assets were $13.2 million.

We expect to receive cash proceeds of approximately $64.3 million from the sale of our business in Spain, which is expected to close in 2024 upon satisfaction of regulatory approval and other customary closing conditions. We have entered into a hedge arrangement to mitigate exchange-rate risk related to these anticipated proceeds. We intend to use the net proceeds from the sale, after payment of transaction-related fees and expenses, to improve liquidity and increase financial flexibility of the business as permitted under our debt agreements.

Credit Facilities

We have access to a Revolving Credit Facility and Receivables-Based Credit Facility, both of which include sub-facilities for letters of credit and short-term borrowings. In 2021, we repaid the $130.0 million balance that was outstanding under the Revolving Credit Facility, which we drew in 2020 to enhance liquidity and preserve financial flexibility during the economic downturn resulting from COVID-19. We did not make any draws under either credit facility in 2023, 2022 or 2021. In June 2023, we amended the Senior Secured Credit Agreement and Receivables-Based Credit Agreement to, among other things, extend the maturity date of substantially all commitments under these credit facilities to August 23, 2026 in the amounts set forth below.

These amendments also resulted in changes to the borrowing limit for each of these facilities, as reflected in the table below, which presents our borrowings and excess availability under these credit facilities as of December 31, 2023. We may request incremental credit commitments under each facility at any time, subject to customary conditions; however, the lenders under such facilities do not have an obligation to provide incremental commitments.

(1)In June 2023, amendments to the Senior Secured Credit Agreement and Receivables-Based Credit Agreement resulted in changes to the borrowing limit for the Revolving Credit Facility and Receivables-Based Credit Facility. The borrowing limit of the Revolving Credit Facility was reduced from $175.0 million to $150.0 million, with the full $150.0 million of commitments available through August 23, 2024 and $115.8 million available through August 23, 2026. The maximum borrowing limit of the Receivables-Based Credit Facility was increased from $125.0 million to $175.0 million. The borrowing limit of the Receivables-Based Credit Facility is equal to the lesser of $175.0 million and the borrowing base, which is calculated based on our accounts receivable balance each period in accordance with our Receivables-Based Credit Agreement.

(2)Letters of credit outstanding under the Revolving Credit Facility at December 31,2023 include a $20.2 million letter of credit related to our former business in France. In connection with the sale of this business, and pursuant to the related share purchase agreement, our former French business and/or Equinox will either replace or procure a counter-guarantee of our payment obligation under the letter of credit. Letters of credit outstanding under the Receivables-Based Credit Facility at December 31, 2023 include a $6.5 million letter of credit related to our business in Spain.

(3)Due to rounding, the total may not equal the sum of the columns or the difference of the line items in the table above.

Please refer to Note 6 to our Consolidated Financial Statements located in Item 8 of this Annual Report on Form 10-K for more details on each of these credit facilities.

Debt Activity

In August 2023, we issued $750.0 million aggregate principal amount of CCOH 9.000% Senior Secured Notes, which mature in September 2028, and used a portion of the net proceeds to prepay $665.0 million of outstanding principal on the Term Loan Facility, which we repurchased at a 1% discount. We paid debt issuance costs of $12.3 million related to these transactions, and the first interest payment on the CCOH 9.000% Senior Secured Notes will be made in March 2024.

In September 2023, we repurchased in the open market $5.0 million principal amount of the CCOH 7.750% Senior Notes and $10.0 million principal amount of the CCOH 7.500% Senior Notes for a total cash payment of $11.8 million, excluding accrued interest. The repurchased notes are held by a subsidiary of the Company and have not been cancelled.

We did not enter into any significant debt transactions during 2022. For a summary of our debt activity during 2021, refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.

Debt Covenants

Our debt agreements contain certain debt covenants, as described in Note 6 to our Consolidated Financial Statements located in Item 8 of this Annual Report on Form 10-K. As of December 31, 2023, we were in compliance with all of the covenants contained in our debt agreements. Further information regarding our compliance with the springing financial covenant required by the Senior Secured Credit Agreement is provided below.

Senior Secured Credit Agreement Financial Covenant

The Senior Secured Credit Agreement contains a springing financial covenant, applicable solely to the Revolving Credit Facility if its balance is greater than $0 and undrawn letters of credit exceed $10 million, that requires compliance with a first lien net leverage ratio of less than 7.10 to 1.00. Our first lien leverage ratio, which is calculated by dividing first lien debt by EBITDA (as defined by the Senior Secured Credit Agreement) for the preceding four quarters, was 5.54 to 1.00 as of December 31, 2023. First lien debt and EBITDA, which both exclude discontinued operations, are presented herein because they are material components of the calculation of the first lien leverage ratio.

First Lien Debt

The following table presents a calculation of our first lien debt as of December 31, 2023:

EBITDA

As required by the definition of “EBITDA” in the Senior Secured Credit Agreement, our EBITDA for the preceding four quarters of $544.0 million is calculated as operating income from continuing operations before depreciation and amortization, impairment charges and share-based compensation; further adjusted for unusual or nonrecurring gains, losses, charges or expenses and any charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation charges; and various other items.

The following table reconciles EBITDA to operating income from continuing operations and consolidated net cash provided by operating activities for the four quarters ended December 31, 2023:

(1)Includes expense of $19.0 million for resolution of the investigation of our former indirect, non-wholly owned subsidiary, Clear Media.

(2)Primarily comprised of interest income and costs related to strategic transactions and reviews.

(3)Due to rounding, the total may not equal the sum of the line items in the table above.

(4)Includes depreciation, amortization and impairment charges; non-cash operating lease expense; gain on extinguishment of debt; deferred taxes; share-based compensation; amortization of deferred financing charges and note discounts; credit loss expense; loss on disposition of businesses and/or operating assets, net; foreign exchange transaction gain; and other reconciling items.