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, impairment charges, 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 $32.2 million, or 6.1%, during the three months ended September 30, 2024 compared to the same period of 2023. Excluding the $2.3 million impact of movements in foreign exchange rates, consolidated revenue increased $29.9 million, or 5.7%.

Consolidated revenue increased $104.3 million, or 7.0%, during the nine months ended September 30, 2024 compared to the same period of 2023. Excluding the $5.0 million impact of movements in foreign exchange rates, consolidated revenue increased $99.3 million, or 6.6%.

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

The following table provides information about consolidated digital revenue:

Consolidated Direct Operating Expenses

Consolidated direct operating expenses increased $13.2 million, or 4.9%, during the three months ended September 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 $11.9 million, or 4.4%.

Consolidated direct operating expenses increased $36.9 million, or 4.7%, during the nine months ended September 30, 2024 compared to the same period of 2023. Excluding the $2.8 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $34.1 million, or 4.3%.

In both periods, site lease expense increased due to higher revenue, lower rent abatements and new contracts, but these increases were partially offset by the impact of certain contract losses and renegotiations. The following table provides additional information about site lease expense and certain other drivers of consolidated direct operating expenses:

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

The remaining increase in consolidated direct operating expenses in both periods primarily resulted from higher property taxes, higher rental costs for additional digital displays, and higher production, installation and maintenance costs associated with revenue growth.

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

Consolidated SG&A expenses increased $12.8 million, or 14.7%, during the three months ended September 30, 2024 compared to the same period of 2023. Excluding the $0.1 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $12.7 million, or 14.6%.

Consolidated SG&A expenses increased $25.1 million, or 9.4%, during the nine months ended September 30, 2024 compared to the same period of 2023. Excluding the $0.6 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $24.6 million, or 9.2%.

In both periods, the largest driver of these increases was higher employee compensation costs, primarily due to higher variable-incentive compensation, pay increases and increased sales headcount. Additionally, property tax expense was lower in the prior year due to a legal settlement.

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

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

Corporate Expenses

Corporate expenses increased $6.0 million, or 17.2%, and decreased $3.6 million, or 2.8%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, corporate expenses increased $6.0 million, or 17.2%, and decreased $4.0 million, or 3.1%, during the three and nine-month periods, respectively.

In both periods, we incurred higher employee compensation costs, largely driven by insurance benefits and bonuses, and certain legal costs associated with property and casualty settlements. Such cost increases (excluding share-based compensation) totaled $4.3 million and $14.3 million during the three and nine-month periods, respectively.

During the nine-month period, these increased costs were more than offset by the impact of a $19.0 million legal liability recorded in the second quarter of 2023 for the resolution of the investigation of our former indirect, non-wholly-owned subsidiary, Clear Media Limited. Such expense is included in “Restructuring and other costs” in the table below.

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

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

Depreciation and Amortization

Depreciation and amortization decreased $0.1 million, or 0.2%, during the three months ended September 30, 2024 compared to the same period of 2023. For the nine months ended September 30, 2024, depreciation and amortization decreased $20.7 million, or 11.1%, compared to the same period of 2023, as certain structures became fully depreciated in the third quarter of 2023.

Impairment Charges

During the three months ended September 30, 2024, we did not recognize any impairment charges. However, 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. No impairment charges were recognized in 2023.

Other Operating Expense, Net

Other operating expense, net, decreased $2.5 million and $0.4 million during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023.

During the three-month period, the decrease was largely driven by lower transaction costs related to our international sales processes and other structural initiatives, which totaled $3.9 million and $5.3 million for the three months ended September 30, 2024 and 2023, respectively.

During the nine-month period, we incurred higher transaction costs related to our international sales processes and other structural initiatives, which totaled $15.8 million and $8.5 million for the nine months ended September 30, 2024 and 2023, respectively, but this increase in costs was offset by a gain on the disposition of certain assets in our America segment during the first quarter of 2024.

Interest Expense, Net

Interest expense, net, increased $7.4 million during the nine months ended September 30, 2024, compared to the same period of 2023, due to higher average interest rates. However, lower interest rates following the March 2024 Debt Transactions led to a $0.4 million decrease in interest expense, net, for the three months ended September 30, 2024 compared to the same period of 2023.

Gain (Loss) on Extinguishment of Debt

During the nine months ended September 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.

During the three and nine months ended September 30, 2023, we recognized a gain on extinguishment of debt of $3.8 million primarily related to our open market repurchases of $5.0 million principal amount of CCOH 7.750% Senior Notes and $10.0 million principal amount of CCOH 7.500% Senior Notes at a discount.

Other Income (Expense), Net

During the three and nine months ended September 30, 2024, we recognized other expense, net, of $0.7 million and $9.1 million, respectively, compared to other expense, net, of $17.3 million and other income, net, of $3.7 million during the three and nine months ended September 30, 2023, respectively.

The fluctuations in other income (expense), net, were largely driven by changes in net foreign exchange gains and losses recognized in connection with intercompany notes denominated in a currency other than the functional currency. Additionally, during the nine months ended September 30, 2024, we incurred $12.0 million of debt modification expense related to the March 2024 Debt Transactions, and during the three and nine months ended September 30, 2023, we incurred $4.4 million of debt modification expense related to the CCOH 9.000% Senior Secured Notes issuance and Term Loan Facility prepayment completed in August 2023.

Income Tax Benefit Attributable to Continuing Operations

The effective tax rates for continuing operations for the three and nine months ended September 30, 2024 were 10.8% and 3.4%, respectively, compared to 0.5% and 6.2% for the three and nine months ended September 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 $14.1 million, or 5.0%, and $30.5 million, or 3.8%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023. In both periods, revenue increased in all regions driven by increased demand for both printed and digital billboards, as well as the deployment of new digital billboards.

The following table provides information about America digital revenue:

Revenue generated from national sales comprised 36.3% and 32.7% of America revenue for the three months ended September 30, 2024 and 2023, respectively, and 35.3% and 33.7% of America revenue for the nine months ended September 30, 2024 and 2023, respectively, while the remainder of revenue was generated from local sales.

America Direct Operating Expenses

America direct operating expenses decreased $1.5 million, or 1.3%, and $1.0 million, or 0.3%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023, due to lower site lease expense driven by the renegotiation of an existing contract and a decrease in estimated lessor property taxes in certain lease arrangements.

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

In both periods, the impact of lower site lease expense was partially offset by higher production, installation and maintenance costs associated with revenue growth.

America SG&A Expenses

America SG&A expenses increased $8.6 million, or 19.0%, and $13.4 million, or 9.3%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023, largely due to higher employee compensation costs driven by higher variable-incentive compensation, increased sales headcount and pay increases, as well as lower property taxes in the prior year due to a legal settlement.

Airports Results of Operations

Airports Revenue

Airports revenue increased $6.8 million, or 9.0%, and $45.1 million, or 22.5%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023, driven by strong advertising demand. Our continued investment in premium inventory in high-volume locations has allowed us to capitalize on this demand and drive revenue growth, most significantly at the Port Authority of New York and New Jersey airports.

The following table provides information about Airports digital revenue:

Revenue generated from national sales comprised 58.6% and 56.8% of Airports revenue for the three months ended September 30, 2024 and 2023, respectively, and 57.2% and 58.7% of Airports revenue for the nine months ended September 30, 2024 and 2023, respectively, while the remainder of revenue was generated from local sales.

Airports Direct Operating Expenses

Airports direct operating expenses increased $4.8 million, or 9.2%, and $24.9 million, or 18.1%, during the three and nine months ended September 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.

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

Airports SG&A Expenses

Airports SG&A expenses increased $0.6 million, or 7.2%, and $3.3 million, or 13.6%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023. During the nine-month period, higher employee compensation costs, largely from sales commissions, drove the majority of the increase.

Europe-North Results of Operations

Europe-North Revenue

Europe-North revenue increased $17.0 million, or 11.4%, during the three months ended September 30, 2024 compared to the same period of 2023. Excluding the $4.2 million impact of movements in foreign exchange rates, Europe-North revenue increased $12.8 million, or 8.6%.

Europe-North revenue increased $42.7 million, or 10.0%, during the nine months ended September 30, 2024 compared to the same period of 2023. Excluding the $7.1 million impact of movements in foreign exchange rates, Europe-North revenue increased $35.6 million, or 8.3%.

In both periods, revenue increased across most of our products, most significantly street furniture displays, and in most of the Europe-North countries in which we operate, most significantly Sweden, due to increased demand following improved economic conditions, and the U.K., which also benefited from 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 $13.1 million, or 13.7%, during the three months ended September 30, 2024 compared to the same period of 2023. Excluding the $2.4 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $10.7 million, or 11.2%.

Europe-North direct operating expenses increased $19.7 million, or 6.8%, during the nine months ended September 30, 2024 compared to the same period of 2023. Excluding the $4.2 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $15.5 million, or 5.4%.

In both periods, site lease expense increased due to higher revenue and new contracts, but these increases were partially offset by the impact of the contract loss in Norway and, during the nine-month period, certain contract renegotiations. The following table provides information about Europe-North site lease expense and rent abatements:

The remaining increase in Europe-North direct operating expenses in both periods primarily resulted from higher property taxes and higher rental costs for additional digital displays.

Europe-North SG&A Expenses

Europe-North SG&A expenses increased $4.5 million, or 17.1%, during the three months ended September 30, 2024 compared to the same period of 2023. Excluding the $0.6 million impact of movements in foreign exchange rates, Europe-North SG&A expenses increased $3.8 million, or 14.7%.

Europe-North SG&A expenses increased $8.5 million, or 11.0%, during the nine months ended September 30, 2024 compared to the same period of 2023. Excluding the $1.3 million impact of movements in foreign exchange rates, Europe-North SG&A expenses increased $7.2 million, or 9.3%.

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 $5.6 million, or 24.4%, and $14.0 million, or 21.7%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other revenue decreased $3.8 million, or 16.5%, and $11.9 million, or 18.5%, during the three and nine-month comparison periods, respectively, driven by the loss of a contract in Singapore.

Other direct operating expenses decreased $3.1 million, or 24.8%, and $6.8 million, or 18.3%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other direct operating expenses decreased $2.1 million, or 16.8%, and $5.3 million, or 14.5%, during the three and nine-month comparison periods, respectively, driven by the loss of a contract in Singapore.

Other SG&A expenses decreased $0.9 million, or 12.4%, and $0.1 million, or 0.5%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other SG&A expenses decreased $0.3 million, or 4.3%, and increased $0.6 million, or 3.1%, during the three and nine-month comparison periods, respectively.

Income (Loss) from Discontinued Operations

Income (loss) from discontinued operations of ($0.0 million) and $9.2 million for the three and nine months ended September 30, 2024, respectively, reflects the net income (loss) generated during the respective period by operations in Spain.

Loss from discontinued operations of $211.7 million for the three months ended September 30, 2023 reflects a loss of $200.6 million recognized upon classification of the former business in France as held for sale, as well as the net loss collectively generated by operations in France and Spain during the three-month period.

Loss from discontinued operations of $152.3 million for the nine months ended September 30, 2023 reflects the $200.6 million loss related to the former business in France, 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 for the nine-month period also reflects the net loss collectively generated during this time by former 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.