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.

•Corporate expenses, depreciation and amortization, other operating income and expense, all non-operating income and expenses, and income taxes are managed on a total 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

(1)Excludes depreciation and amortization

Consolidated Revenue

Consolidated revenue increased $27.7 million, or 5.2%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $1.0 million impact of movements in foreign exchange rates, consolidated revenue increased $28.7 million, or 5.4%.

Consolidated revenue increased $72.1 million, or 7.4%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $2.7 million impact of movements in foreign exchange rates, consolidated revenue increased $69.4 million, or 7.2%.

In both periods, these increases were driven by higher demand and our continued investment in digital infrastructure throughout the business, with the most significant growth in our Airports and Europe-North segments.

The following table provides information about consolidated digital revenue:

Consolidated Direct Operating Expenses

Consolidated direct operating expenses increased $15.4 million, or 5.8%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.8 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $16.2 million, or 6.1%.

Consolidated direct operating expenses increased $23.6 million, or 4.6%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $1.4 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $22.2 million, or 4.3%.

In both periods, the largest driver of these increases was higher site lease expense, driven by higher revenue and lower rent abatements, partially offset by the impact of certain contract losses and renegotiations.

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

(1)Percentage changes that are so large as to not be meaningful have been designated as “NM.”

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

Consolidated SG&A expenses increased $9.6 million, or 10.7%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.3 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $9.9 million, or 11.1%.

Consolidated SG&A expenses increased $12.4 million, or 6.9%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.5 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $11.9 million, or 6.6%.

In both periods, the largest driver of these increases was higher employee compensation costs, primarily due to higher variable-incentive compensation, increased sales headcount and pay increases.

The following table provides the restructuring and other costs included within SG&A expenses during the three and six months ended June 30, 2024 and 2023:

Corporate Expenses

Corporate expenses decreased $13.6 million, or 23.3%, and $9.7 million, or 10.2%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, corporate expenses decreased $13.6 million, or 23.4%, and $10.0 million, or 10.6%, during the three- and six-month comparison periods, respectively, primarily driven by a $19.0 million legal liability recorded in the second quarter of 2023 for the resolution of the investigation of the Company’s former indirect, non-wholly-owned subsidiary, Clear Media Limited. Such expense is included in “Restructuring and other costs” in the table below. This corporate expense decrease was partially offset by cost increases of $5.6 million and $9.9 million during the three- and six-month comparison periods, respectively, for higher employee compensation costs (excluding share-based compensation), largely driven by bonuses and insurance benefits, and certain legal costs associated with property and casualty settlements.

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.

Depreciation and Amortization

Depreciation and amortization decreased $10.6 million, or 16.5%, and $20.5 million, or 16.0%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, as certain structures became fully depreciated in the third quarter of 2023.

Impairment Charges

In the second quarter of 2024, we recognized impairment charges of $18.1 million related to long-lived assets within certain of our Latin American businesses. We did not recognize any impairment charges during 2023.

Other Operating Expense, Net

Other operating expense, net, increased $4.6 million and $2.1 million during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily driven by higher transaction costs related to our international sales processes and other structural initiatives. During the six-month period, the increase in transaction costs was partially offset by a gain on the disposition of certain assets in our America segment during the first quarter of 2024.

Other operating expense, net, included transaction costs of $5.7 million and $1.9 million during the three months ended June 30, 2024 and 2023, respectively, and $11.9 million and $3.2 million during the six months ended June 30, 2024 and 2023, respectively. In each period, these costs were partially offset by net gains on the disposition of operating assets.

Interest Expense, Net

Interest expense, net, increased $2.7 million and $7.8 million during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, driven by higher interest rates.

Loss on Extinguishment of Debt

During the six months ended June 30, 2024, we recognized a loss on extinguishment of debt of $4.8 million related to the March 2024 Debt Transactions, including $2.4 million related to the prepayment and amendment of the Term Loan Facility and $2.4 million related to the redemption of the CCIBV Senior Secured Notes.

Other Income (Expense), Net

During the three months and six months ended June 30, 2024, we recognized other expense, net, of $0.1 million, and $8.4 million, respectively, compared to other income, net, of $12.2 million and $21.0 million during the same periods of 2023, respectively. The increases in expense were largely driven by lower net foreign currency transaction gains recognized in connection with intercompany notes denominated in a currency other than the functional currency. Additionally, during the six months ended June 30, 2024, we incurred $12.0 million of debt modification expense related to the March 2024 Debt Transactions.

Income Tax Benefit Attributable to Continuing Operations

The effective tax rates for continuing operations for the three and six months ended June 30, 2024 were 4.8% and 1.6%, respectively, compared to 3.2% and 8.2% for the three and six months ended June 30, 2023, respectively. The effective tax rates for each period were primarily impacted by the valuation allowance recorded against current period deferred tax assets resulting from losses and interest expense carryforwards in the U.S. and certain foreign jurisdictions due to uncertainty regarding the Company’s ability to realize those assets in future periods.

America Results of Operations

America Revenue

America revenue increased $2.7 million, or 0.9%, and $16.4 million, or 3.1%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, driven by increased demand and the deployment of new digital billboards. In both periods, most of our U.S. markets experienced revenue growth, led by Miami.

Additionally, during the first half of 2023, America revenue was negatively impacted by weak economic conditions in certain markets, most notably those in California. As conditions in these markets have improved, demand for out-of-home advertising has increased in the current year.

The following table provides information about America digital revenue:

Revenue generated from national sales comprised 35.0% of America revenue for both the three months ended June 30, 2024 and 2023, and 34.8% and 34.2% of America revenue for the six months ended June 30, 2024 and 2023, respectively, while the remainder of revenue was generated from local sales.

America Direct Operating Expenses

America direct operating expenses decreased $0.1 million, or 0.1%, during the three months ended June 30, 2024 compared to the same period of 2023. Lower site lease expense, driven by the renegotiation of an existing contract and lower revenue-share rent payments, was largely offset by increases in production, installation and maintenance costs.

America direct operating expenses increased $0.5 million, or 0.2%, during the six months ended June 30, 2024 compared to the same period of 2023. Higher employee compensation costs were offset by lower site lease expense driven by the renegotiation of an existing contract.

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

America SG&A Expenses

America SG&A expenses increased $5.4 million, or 11.1%, during the three months ended June 30, 2024 compared to the same period of 2023, primarily due to higher employee compensation costs driven by increased sales headcount, pay increases and higher variable-incentive compensation, as well as higher credit loss expense related to specific reserves for certain customers.

America SG&A expenses increased $4.8 million, or 4.9%, during the six months ended June 30, 2024 compared to the same period of 2023, due to higher employee compensation costs driven by increased sales headcount, pay increases and higher variable-incentive compensation. This increase was partially offset by lower credit loss expense driven by improved collections and specific reserves recorded in the prior year.

Airports Results of Operations

Airports Revenue

Airports revenue increased $15.2 million, or 21.4%, and $38.3 million, or 30.7%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, driven by strong demand across the portfolio, most significantly at the Port Authority of New York and New Jersey airports and the San Francisco International Airport. Our continued investment in premium inventory in high-volume locations has allowed us to capitalize on this demand, with much of our revenue growth attributable to new advertising customers.

The following table provides information about Airports digital revenue:

Revenue generated from national sales comprised 57.7% and 59.7% of Airports revenue for the three months ended June 30, 2024 and 2023, respectively, and 56.5% and 59.8% of Airports revenue for the six months ended June 30, 2024 and 2023, respectively, while the remainder of revenue was generated from local sales.

Airports Direct Operating Expenses

Airports direct operating expenses increased $10.8 million, or 22.9%, and $20.2 million, or 23.3%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily driven by higher site lease expense resulting from higher revenue and lower rent abatements. We also incurred higher production, installation and maintenance costs related to the growth in revenue.

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

Airports SG&A Expenses

Airports SG&A expenses increased $1.7 million, or 21.4%, and $2.7 million, or 17.0%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, most notably due to higher employee compensation costs largely driven by sales commissions.

Europe-North Results of Operations

Europe-North Revenue

Europe-North revenue increased $14.8 million, or 9.9%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.3 million impact of movements in foreign exchange rates, Europe-North revenue increased $15.2 million, or 10.1%.

Europe-North revenue increased $25.7 million, or 9.2%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $3.0 million impact of movements in foreign exchange rates, Europe-North revenue increased $22.8 million, or 8.2%.

In both periods, revenue increased in most of the Europe-North countries in which we operate, most significantly in the U.K. and Sweden, due to increased demand and the deployment of additional digital displays. These increases were partially offset by the loss of a transit contract in Norway.

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

Europe-North Direct Operating Expenses

Europe-North direct operating expenses increased $6.3 million, or 6.4%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.3 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $6.5 million, or 6.7%, primarily due to higher property taxes, higher rental costs for additional digital displays and higher site lease expense.

Europe-North direct operating expenses increased $6.6 million, or 3.4%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $1.8 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $4.8 million, or 2.5%, mainly driven by higher property taxes and higher rental costs for additional digital displays. These increases were partially offset by lower site lease expense.

The following table provides information about Europe-North site lease expense and rent abatements. In both comparison periods, increases in site lease expense due to higher revenue and new contracts were offset by the impact of the contract loss in Norway and certain contract renegotiations.

Europe-North SG&A Expenses

Europe-North SG&A expenses increased $1.7 million, or 6.5%, during the three months ended June 30, 2024 compared to the same period of 2023. The impact of movements in foreign exchange rates was not significant.

Europe-North SG&A expenses increased $4.1 million, or 7.8%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.7 million impact of movements in foreign exchange rates, Europe-North SG&A expenses increased $3.4 million, or 6.6%.

In both periods, these increases were primarily due to higher employee compensation costs driven by pay increases and variable-incentive compensation.

Other Results of Operations

Other revenue decreased $5.0 million, or 22.2%, and $8.4 million, or 20.3%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other revenue decreased $4.3 million, or 19.2%, and $8.1 million, or 19.6%, during the three- and six-month comparison periods, respectively, driven by the loss of a contract in Singapore.

Other direct operating expenses decreased $1.6 million, or 12.7%, and $3.7 million, or 15.0%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other direct operating expenses decreased $1.1 million, or 8.5%, and $3.2 million, or 13.3%, during the three- and six-month comparison periods, respectively, driven by the loss of a contract in Singapore.

Other SG&A expenses increased $0.8 million, or 12.2%, and $0.8 million, or 6.1%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other SG&A expenses increased $1.1 million, or 16.5%, and $1.0 million, or 7.3%, during the three- and six-month comparison periods, respectively.

Income from Discontinued Operations

Income from discontinued operations of $9.7 million and $9.3 million during the three and six months ended June 30, 2024, respectively, reflects the net income generated during these periods by operations in Spain.

Income from discontinued operations of $2.2 million during the three months ended June 30, 2023 reflects a gain on the sale of our former business in Italy of $11.2 million, partially offset by the net loss collectively generated during the three-month period by operations in Italy (through its sale date), France and Spain.

Income from discontinued operations of $59.4 million during the six months ended June 30, 2023 reflects gains on the sales of our former businesses in Switzerland and Italy of $96.4 million and $11.2 million, respectively, partially offset by the net loss collectively generated during the six-month period by operations in Switzerland and Italy (through their sale dates), France and Spain, as well as income tax expense related to the sale of our former business in Switzerland.