10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 10, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
FOR THE TRANSITION PERIOD FROM TO
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
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(Address of principal executive offices) | (Zip Code) | ||||||||||
(Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Exchange on Which Registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class | Outstanding at May 5, 2022 | ||||
- - - - - - - - - - - - - - - - - - - - - - - - - - | - - - - - - - - - - - - - - - - - - - - - - - - - - | ||||
Common Stock, $0.01 par value per share |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
TABLE OF CONTENTS
Page Number | ||||||||
PART I—FINANCIAL INFORMATION | ||||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II—OTHER INFORMATION | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
1
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page Number | |||||
Financial Statements: | |||||
Condensed Notes to Consolidated Financial Statements: | |||||
2
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data) | March 31, 2022 |
December 31, 2021 |
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(Unaudited) | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Prepaid expenses | |||||||||||
Other current assets | |||||||||||
Total Current Assets | |||||||||||
PROPERTY, PLANT AND EQUIPMENT | |||||||||||
Structures, net | |||||||||||
Other property, plant and equipment, net | |||||||||||
INTANGIBLE ASSETS AND GOODWILL | |||||||||||
Indefinite-lived permits | |||||||||||
Other intangible assets, net | |||||||||||
Goodwill | |||||||||||
OTHER ASSETS | |||||||||||
Operating lease right-of-use assets | |||||||||||
Other assets | |||||||||||
Total Assets | $ | $ | |||||||||
CURRENT LIABILITIES | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Current operating lease liabilities | |||||||||||
Accrued interest | |||||||||||
Deferred revenue | |||||||||||
Current portion of long-term debt | |||||||||||
Total Current Liabilities | |||||||||||
NON-CURRENT LIABILITIES | |||||||||||
Long-term debt | |||||||||||
Non-current operating lease liabilities | |||||||||||
Deferred tax liabilities, net | |||||||||||
Other long-term liabilities | |||||||||||
Total Liabilities | |||||||||||
Commitments and Contingencies (Note 5) |
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STOCKHOLDERS’ DEFICIT | |||||||||||
Noncontrolling interest | |||||||||||
Common stock, par value $ |
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Additional paid-in capital | |||||||||||
Accumulated deficit | ( |
( |
|||||||||
Accumulated other comprehensive loss | ( |
( |
|||||||||
Treasury stock ( |
( |
( |
|||||||||
Total Stockholders' Deficit | ( |
( |
|||||||||
Total Liabilities and Stockholders' Deficit | $ | $ |
See Condensed Notes to Consolidated Financial Statements
3
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
(In thousands, except per share data) | Three Months Ended | ||||||||||
March 31, | |||||||||||
2022 | 2021 | ||||||||||
Revenue | $ | $ | |||||||||
Operating expenses: | |||||||||||
Direct operating expenses(1)
|
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Selling, general and administrative expenses(1)
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|||||||||||
Corporate expenses(1)
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Depreciation and amortization | |||||||||||
Impairment charges | |||||||||||
Other operating expense (income), net | ( |
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Operating loss | ( |
( |
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Interest expense, net | ( |
( |
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Loss on extinguishment of debt | ( |
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Other income (expense), net | ( |
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Loss before income taxes | ( |
( |
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Income tax benefit | |||||||||||
Consolidated net loss | ( |
( |
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Less amount attributable to noncontrolling interest | ( |
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Net loss attributable to the Company | $ | ( |
$ | ( |
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Net loss attributable to the Company per share of common stock — basic and diluted | $ | ( |
$ | ( |
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(1)Excludes depreciation and amortization
See Condensed Notes to Consolidated Financial Statements
4
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In thousands) | Three Months Ended | ||||||||||
March 31, | |||||||||||
2022 | 2021 | ||||||||||
Net loss attributable to the Company | $ | ( |
$ | ( |
|||||||
Other comprehensive income (loss): | |||||||||||
Foreign currency translation adjustments | ( |
||||||||||
Reclassification adjustments | |||||||||||
Other comprehensive income (loss) | ( |
||||||||||
Comprehensive loss | ( |
( |
|||||||||
Less amount attributable to noncontrolling interest | ( |
( |
|||||||||
Comprehensive loss attributable to the Company | $ | ( |
$ | ( |
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See Condensed Notes to Consolidated Financial Statements
5
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Controlling Interest | Total | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | Common Shares Issued | Non-controlling Interest | Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2021 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | ( |
— | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Controlling Interest | Total | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | Common Shares Issued | Non-controlling Interest | Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2020 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net loss | ( |
— | — | ( |
— | — | ( |
||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ( |
— | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2021 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
See Condensed Notes to Consolidated Financial Statements
6
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) | Three Months Ended March 31, | ||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities: | |||||||||||
Consolidated net loss | $ | ( |
$ | ( |
|||||||
Reconciling items: | |||||||||||
Depreciation, amortization and impairment charges | |||||||||||
Non-cash operating lease expense | |||||||||||
Loss on extinguishment of debt | |||||||||||
Deferred taxes | ( |
( |
|||||||||
Gain on disposal of operating and other assets, net | ( |
( |
|||||||||
Foreign exchange transaction loss (gain) | ( |
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Other reconciling items, net | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Decrease in accounts receivable | |||||||||||
Increase in prepaid expenses and other operating assets | ( |
( |
|||||||||
Decrease in accounts payable and accrued expenses | ( |
( |
|||||||||
Decrease in operating lease liabilities | ( |
( |
|||||||||
Increase (decrease) in accrued interest | ( |
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Increase in deferred revenue | |||||||||||
Increase in other operating liabilities | |||||||||||
Net cash provided by (used for) operating activities | ( |
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Cash flows from investing activities: | |||||||||||
Purchases of property, plant and equipment | ( |
( |
|||||||||
Asset acquisitions | ( |
( |
|||||||||
Proceeds from disposal of assets | |||||||||||
Other investing activities, net | |||||||||||
Net cash used for investing activities | ( |
( |
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Cash flows from financing activities: | |||||||||||
Proceeds from long-term debt | |||||||||||
Payments on long-term debt | ( |
( |
|||||||||
Debt issuance costs | ( |
||||||||||
Other financing activities, net | ( |
( |
|||||||||
Net cash used for financing activities | ( |
( |
|||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( |
( |
|||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | ( |
||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
Supplemental disclosures: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for income taxes, net of refunds | $ | $ |
See Condensed Notes to Consolidated Financial Statements
7
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
Preparation of Interim Financial Statements
The consolidated financial statements include the accounts of Clear Channel Outdoor Holdings, Inc. and its subsidiaries, as well as entities in which the Company has a controlling financial interest or for which the Company is the primary beneficiary. Intercompany transactions have been eliminated in consolidation. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries.
The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year. The financial statements contained herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on February 24, 2022.
New Accounting Pronouncements Not Yet Adopted
In November 2021, the Financial Accounting Standards Board (the “FASB”) issued ASU 2021-10, Disclosures by Business Entities about Government Assistance, which requires disclosures that increase the transparency of certain transactions with governments. The amendments in this ASU are effective for annual periods beginning after December 15, 2021 and may be applied prospectively or retrospectively. The Company does not expect to be materially impacted by the implementation of this ASU.
Reference Rate Reform
For the last several years, there has been an ongoing effort amongst regulators, standard setters, financial institutions and other market participants to replace interbank offered rates, including the London Interbank Offered Rate (“LIBOR”), with alternative reference rates. In the United States (“U.S.”), the Alternative Reference Rates Committee has formally recommended forward-looking Secured Overnight Financing Rate term rates as the replacement for USD LIBOR, while various other risk-free rates have been selected to replace LIBOR for other currencies. After December 31, 2021, the ICE Benchmark Administration, LIBOR’s administrator, ceased publication of certain LIBOR rates, and the remaining USD LIBOR rates will be published through June 30, 2023. The Company is currently working with the administrative agent of its Senior Secured Credit Facilities and Receivables-Based Credit Facility to finalize replacement rates but does not expect the replacement of LIBOR to result in a material impact on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, in order to ease the potential burden of accounting for reference rate reform initiatives. The update provides temporary optional expedients and exceptions for applying GAAP contract modification accounting to contracts and other transactions affected by reference rate reform if certain criteria are met and may be applied through December 31, 2022. The Company is assessing whether it will use these optional expedients and exceptions but does not expect adoption of this guidance to have a material impact on the Company’s consolidated financial statements or disclosures. The Company will continue to monitor and assess regulatory developments during the transition period.
8
NOTE 2 – SEGMENT DATA
The Company has two reportable segments, which it believes best reflect how the Company is currently managed – Americas and Europe. The Americas segment consists of operations primarily in the U.S., and the Europe segment consists of operations in Europe and Singapore. The Company’s remaining operating segment, Latin America, does not meet the quantitative threshold to qualify as a reportable segment and is disclosed as “Other” herein. Each segment provides out-of-home advertising services in its respective geographic region using various digital and traditional display types, consisting primarily of billboards, street furniture displays and transit displays.
Segment Adjusted EBITDA is the profitability metric reported to the Company’s Chief Operating Decision Maker (“CODM”) for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA 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. Segment information for total assets is not presented as this information is not used by the Company’s CODM in measuring segment performance or allocating resources between the Company’s segments.
The following table presents the Company’s reportable segment results for the three months ended March 31, 2022 and 2021:
(In thousands) | Three Months Ended March 31, | |||||||||||||
2022 | 2021 | |||||||||||||
Revenue | ||||||||||||||
Americas | $ | $ | ||||||||||||
Europe | ||||||||||||||
Other | ||||||||||||||
Total | $ | $ | ||||||||||||
Capital Expenditures | ||||||||||||||
Americas | $ | $ | ||||||||||||
Europe | ||||||||||||||
Other | ||||||||||||||
Corporate | ||||||||||||||
Total | $ | $ | ||||||||||||
Segment Adjusted EBITDA | ||||||||||||||
Americas | $ | $ | ||||||||||||
Europe | ( |
( |
||||||||||||
Other | ( |
( |
||||||||||||
Total | $ | $ | ( |
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Reconciliation of Segment Adjusted EBITDA to Consolidated Net Loss Before Income Taxes | ||||||||||||||
Segment Adjusted EBITDA | $ | $ | ( |
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Less reconciling items: | ||||||||||||||
Corporate expenses(1)
|
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Depreciation and amortization | ||||||||||||||
Impairment charges | ||||||||||||||
Restructuring and other costs(2)
|
||||||||||||||
Other operating expense (income), net | ( |
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Interest expense, net | ||||||||||||||
Other reconciling items(3)
|
||||||||||||||
Consolidated net loss before income taxes | $ | ( |
$ | ( |
9
(1)Corporate expenses include expenses related to infrastructure and support, including information technology, human resources, legal, finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments and certain restructuring and other costs are recorded in corporate expenses.
(2)The restructuring and other costs line item in this reconciliation excludes those restructuring and other costs related to corporate functions, which are included within the Corporate expenses line item.
(3)Other reconciling items includes Loss on extinguishment of debt and Other income (expense), net.
NOTE 3 – REVENUE
The Company generates revenue primarily from the sale of advertising space on printed and digital out-of-home advertising displays. Certain of these revenue transactions are considered leases for accounting purposes as the contracts convey to customers the right to control the use of the Company’s advertising displays for a period of time. The Company accounts for revenue from leases in accordance with the lease accounting guidance under ASC Topic 842. All remaining revenue transactions are accounted for as revenue from contracts with customers under ASC Topic 606.
Disaggregation of Revenue
The following table shows revenue from contracts with customers, revenue from leases and total revenue, disaggregated by segment, for the three months ended March 31, 2022 and 2021:
(In thousands) | Revenue from contracts with customers | Revenue from leases | Total Revenue | ||||||||||||||
Three Months Ended March 31, 2022 | |||||||||||||||||
Americas(1)
|
$ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other | |||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Three Months Ended March 31, 2021 | |||||||||||||||||
Americas(1)
|
$ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other | |||||||||||||||||
Total | $ | $ | $ |
(1)Americas total revenue for the three months ended March 31, 2022 and 2021 includes revenue from transit displays of $59.0 million and $21.4 million, respectively, including revenue from airport displays of $55.9 million and $19.5 million, respectively.
Revenue from Contracts with Customers
The following tables show the Company’s beginning and ending accounts receivable and deferred revenue balances from contracts with customers:
Three Months Ended March 31, | |||||||||||
(In thousands) | 2022 | 2021 | |||||||||
Accounts receivable, net of allowance, from contracts with customers: | |||||||||||
Beginning balance | $ | $ | |||||||||
Ending balance | $ | $ | |||||||||
Deferred revenue from contracts with customers: | |||||||||||
Beginning balance | $ | $ | |||||||||
Ending balance | $ | $ |
During the three months ended March 31, 2022 and 2021, respectively, the Company recognized $32.3 million and $28.0 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective periods.
10
NOTE 4 – LONG-TERM DEBT
Long-term debt outstanding as of March 31, 2022 and December 31, 2021 consisted of the following:
(In thousands) | March 31, 2022 |
December 31, 2021 |
|||||||||
Term Loan Facility(1)
|
$ | $ | |||||||||
Revolving Credit Facility | |||||||||||
Receivables-Based Credit Facility | |||||||||||
Clear Channel Outdoor Holdings |
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Clear Channel Outdoor Holdings |
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Clear Channel Outdoor Holdings |
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Clear Channel International B.V. |
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Other debt(2)
|
|||||||||||
Original issue discount | ( |
( |
|||||||||
Long-term debt fees | ( |
( |
|||||||||
Total debt | |||||||||||
Less: Current portion | |||||||||||
Total long-term debt | $ | $ |
(1)During the three months ended March 31, 2022, the Company paid $5.0 million of the outstanding principal on the Term Loan Facility in accordance with the terms of the senior secured credit agreement ("Senior Secured Credit Agreement") governing the Senior Secured Credit Facilities, which consist of the Term Loan Facility and the Revolving Credit Facility.
(2)Other debt includes finance leases and various borrowings utilized for general operating purposes, including a state-guaranteed loan with a third-party lender of €30.0 million, or approximately $33.2 million at current exchange rates. This loan bears an interest rate of 0 % through June 2022, at which point the Company must pay a fee relating to the state guarantee equal to 0.5 % of the amount of the loan. In April 2022, the Company elected to extend the loan’s maturity date to June 29, 2027, with quarterly principal repayments of €1.875 million due beginning in September 2023. The interest rate for the extended period is currently being negotiated with the lender. The annual cost of the state guarantee will be 1.0 % for the next two years and 2.0 % for the remainder of the loan term.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.6 billion and $5.9 billion as of March 31, 2022 and December 31, 2021, respectively. Under the fair value hierarchy established by ASC 820-10-35, the inputs used to determine the market value of the Company’s debt are classified as Level 1.
As of March 31, 2022, the Company was in compliance with all covenants contained in its debt agreements.
Letters of Credit, Surety Bonds and Guarantees
As of March 31, 2022, the Company had $43.2 million of letters of credit outstanding under its Revolving Credit Facility, resulting in $131.8 million of remaining excess availability. Additionally, as of March 31, 2022, the Company had $40.9 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $84.1 million of excess availability. As of March 31, 2022, the Company had $87.8 million and $29.2 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $9.3 million of cash collateral. These letters of credit, surety bonds and bank guarantees relate to various operational matters, including insurance, bid, concession and performance bonds, as well as other items.
11
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies, in each case related to these proceedings. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.
Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial disputes, employment and benefits related claims, land use and zoning disputes, governmental fines, intellectual property claims and tax disputes.
China Investigation
The Company advised both the SEC and the United States Department of Justice ("DOJ") of the investigation of Clear Media and is cooperating to provide documents, interviews and information to these agencies. Subsequent to the announcement that the Company was considering a strategic review of its stake in Clear Media, in March 2020, Clear Channel Outdoor Holdings, Inc. received a subpoena from the staff of the SEC and a Grand Jury subpoena from the U.S. Attorney's Office for the Eastern District of New York, both in connection with the previously disclosed investigations. On April 28, 2020, the Company tendered the shares representing its 50.91 % stake in Clear Media to Ever Harmonic Global Limited (“Ever Harmonic”), a special-purpose vehicle wholly-owned by a consortium of investors, which includes the chief executive officer and an executive director of Clear Media, and on May 14, 2020, the Company received the final proceeds of the sale. In connection with the sale of its shares in Clear Media, the Company entered into an Investigation and Litigation Support Agreement with Clear Media and Ever Harmonic that requires Clear Media, if requested by the SEC and/or the DOJ, to use reasonable efforts to timely provide relevant factual information to the SEC and/or the DOJ, among other obligations.
In connection with its investigation, the SEC has also requested information regarding the Company’s historical oversight of its business in Italy and the misstatements and related forensic investigation. The Company is cooperating to provide documents and information responsive to the SEC’s inquiries and is voluntarily sharing the documents and information with the DOJ.
The SEC and DOJ investigation could implicate the books and records, internal controls and anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, which statute and regulations provide for potential monetary penalties as well as criminal and civil sanctions. As previously disclosed, the Company has begun meeting with these agencies to engage in discussions about potential resolution of these matters, including potential settlement. Based on the discussions to date, the Company recorded an estimated liability during the first quarter of 2022 to account for a potential resolution of these matters. However, at this time, the Company cannot predict the eventual scope, duration or outcome of these discussions, including whether a settlement will be reached, the amount of any potential monetary payments or the scope of injunctive or other relief, the results of which may be materially adverse to the Company, its financial condition and its results of operations. At this time, the Company is unable to reasonably estimate, or provide any assurance regarding, the amount of any potential loss in excess of the amount accrued relating to this investigation.
12
NOTE 6 – INCOME TAXES
Income Tax Benefit
The Company’s income tax benefit for the three months ended March 31, 2022 and 2021 consisted of the following components:
(In thousands) | Three Months Ended March 31, | ||||||||||
2022 | 2021 | ||||||||||
Current tax benefit | $ | $ | |||||||||
Deferred tax benefit | |||||||||||
Income tax benefit | $ | $ |
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT
The Company’s property, plant and equipment consisted of the following classes of assets as of March 31, 2022 and December 31, 2021:
(In thousands) | March 31, 2022 |
December 31, 2021 |
|||||||||
Structures | $ | $ | |||||||||
Furniture and other equipment | |||||||||||
Land, buildings and improvements | |||||||||||
Construction in progress | |||||||||||
Property, plant and equipment, gross | |||||||||||
Less: Accumulated depreciation | ( |
( |
|||||||||
Property, plant and equipment, net | $ | $ |
NOTE 8 – INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following table presents the gross carrying amount and accumulated amortization for each major class of intangible assets as of March 31, 2022 and December 31, 2021:
(In thousands) | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||
Indefinite-lived permits | $ | $ | — | $ | $ | — | |||||||||||||||||
Transit, street furniture and other outdoor contractual rights | ( |
( |
|||||||||||||||||||||
Permanent easements | |||||||||||||||||||||||
Trademarks | ( |
( |
|||||||||||||||||||||
Other | ( |
( |
|||||||||||||||||||||
Total intangible assets | $ | $ | ( |
$ | $ | ( |
The Company performs its annual impairment test for indefinite-lived intangible assets as of July 1 of each year and more frequently as events or changes in circumstances warrant, as described in the Company's 2021 Annual Report on Form 10-K. During the three months ended March 31, 2021, the Company tested its indefinite-lived permits for impairment due to an increase in the discount rate, resulting in an impairment charge of $119.0 million. The Company did not perform an impairment test during the three months ended March 31, 2022 as there were no indicators of impairment.
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Goodwill
The following table presents changes in the goodwill balance for the Company’s segments during the three months ended March 31, 2022:
(In thousands) | Americas | Europe | Other | Consolidated | |||||||||||||||||||
Balance as of December 31, 2021(1)
|
$ | $ | $ | $ | |||||||||||||||||||
Foreign currency | ( |
( |
|||||||||||||||||||||
Balance as of March 31, 2022 | $ | $ | $ | $ |
(1)The balance at December 31, 2021 is net of cumulative impairments of $2.6 billion, $191.4 million and $90.4 million for Americas, Europe and Other, respectively.
NOTE 9 – COST-SAVINGS INITIATIVES
Restructuring Plan to Reduce Headcount
During 2020, the Company committed to a restructuring plan to reduce headcount in its Europe segment, upon which it continued to execute through the fourth quarter of 2021 when the impacted employees were terminated. During the three months ended March 31, 2022, it was determined that actual costs would be less than previously estimated due to former employees no longer being eligible for severance upon finding alternative employment in accordance with the terms of the restructuring plan, resulting in a net reversal of costs during the period. Remaining costs associated with this restructuring plan are not expected to be significant.
The following table presents net costs incurred (reversed) in the Company’s Europe segment in connection with this restructuring plan during the three months ended March 31, 2022 and 2021 and since the plan was initiated:
(In thousands) | Three Months Ended March 31, | Total to date | |||||||||||||||
2022 | 2021 | March 31, 2022 |
|||||||||||||||
Costs incurred (reversed) in Europe segment, net: | |||||||||||||||||
Direct operating expenses(1)
|
$ | ( |
$ | $ | |||||||||||||
Selling, general and administrative expenses(1)
|
|||||||||||||||||
Total charges (reversals), net | $ | ( |
$ | $ |
(1)Costs are categorized as Restructuring and other costs and are therefore excluded from Segment Adjusted EBITDA.
Additionally, the Company recognized $0.9 million of corporate costs related to this restructuring plan during the three months ended March 31, 2021.
As of March 31, 2022, the total liability related to this restructuring plan was $18.2 million, which the Company expects to pay this year, although payments may be made through the end of the second quarter of 2023 in accordance with the terms of the restructuring plan. The following table presents changes in this liability balance during the three months ended March 31, 2022:
(In thousands) | Europe | Corporate | Total | ||||||||||||||
Liability balance as of December 31, 2021 |
$ | $ | $ | ||||||||||||||
Costs reversed, net(1)
|
( |
( |
|||||||||||||||
Costs paid or otherwise settled | ( |
( |
|||||||||||||||
Liability balance as of March 31, 2022 |
$ | $ | $ |
(1)Substantially all costs related to this restructuring plan were severance benefits and related costs.
Other Restructuring Costs
In addition, the Company has incurred restructuring costs associated with various other cost-savings initiatives outside of the aforementioned restructuring plan, primarily related to one-time termination benefits, including $1.0 million and $0.2 million in Corporate and Europe, respectively, during the three months ended March 31, 2022 and $1.4 million in Corporate during the three months ended March 31, 2021. As of March 31, 2022, the total remaining liability related to these other cost-savings initiatives was approximately $2.1 million and is expected to be paid through the first quarter of 2023.
14
NOTE 10 – NET LOSS PER SHARE
The following table presents the computation of net loss per share for the three months ended March 31, 2022 and 2021:
(In thousands, except per share data) | Three Months Ended March 31, |
||||||||||
2022 | 2021 | ||||||||||
Numerator: | |||||||||||
Net loss attributable to the Company – common shares | $ | ( |
$ | ( |
|||||||
Denominator: | |||||||||||
Weighted average common shares outstanding – basic | |||||||||||
Weighted average common shares outstanding – diluted | |||||||||||
Net loss attributable to the Company per share of common stock: | |||||||||||
Basic | $ | ( |
$ | ( |
|||||||
Diluted | $ | ( |
$ | ( |
Outstanding equity awards of 27.6 million and 25.9 million for the three months ended March 31, 2022 and 2021, respectively, were not included in the computation of diluted earnings per share because doing so would have been anti-dilutive.
NOTE 11 — OTHER INFORMATION
Restricted Cash
The following table reconciles cash and cash equivalents reported in the Consolidated Balance Sheets to the cash, cash equivalents and restricted cash reported in the Consolidated Statements of Cash Flows:
(In thousands) | March 31, 2022 |
December 31, 2021 |
|||||||||
Cash and cash equivalents in the Balance Sheet | $ | $ | |||||||||
Restricted cash included in: | |||||||||||
Other current assets | |||||||||||
Other assets | |||||||||||
Total cash, cash equivalents and restricted cash in the Statement of Cash Flows | $ | $ |
Accounts Receivable and Allowance for Credit Losses
The following table discloses the components of “Accounts receivable, net,” as reported in the Consolidated Balance Sheets:
(In thousands) | March 31, 2022 |
December 31, 2021 |
|||||||||
Accounts receivable | $ | $ | |||||||||
Less: Allowance for credit losses | ( |
( |
|||||||||
Accounts receivable, net | $ | $ |
Credit loss expense (reversal) related to accounts receivable was $0.3 million and $(0.7 ) million during the three months ended March 31, 2022 and 2021, respectively.
Other Comprehensive Income (Loss)
There were no significant changes in deferred income tax liabilities resulting from adjustments to other comprehensive income (loss) during the three months ended March 31, 2022 and 2021.
Share-Based Compensation
On May 4, 2022, the Compensation Committee of the Board of Directors approved grants of 5.2 million restricted stock units (“RSUs”) and 1.8 million performance stock units (“PSUs”) to certain of its employees.
•The RSUs generally vest in three equal annual installments on each of April 1, 2023, April 1, 2024 and April 1, 2025, provided that the recipient is still employed by or providing services to the Company on each vesting date.
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and related notes contained in Item 1 of this Quarterly Report on Form 10-Q and the Company's 2021 Annual Report on Form 10-K. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries.
The MD&A is organized as follows:
•Overview – Discussion of the nature, key developments and trends of our business in order to provide context for the remainder of this MD&A.
•Results of Operations – Analysis of our financial results of operations at the consolidated and segment levels.
•Liquidity and Capital Resources – Analysis of our short- and long-term liquidity and discussion of our material cash requirements and the anticipated sources of funds needed to satisfy such requirements.
This discussion contains forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially from those contained in any forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements” contained at the end of this MD&A.
OVERVIEW
Description of Our Business and Segments
Our revenue is derived from selling advertising space on the displays we own or operate in key markets worldwide. We have two reportable business segments, which we believe reflect how the Company is currently managed: Americas, which consists of operations primarily in the U.S., and Europe, which consists of operations in Europe and Singapore. Our remaining operating segment of Latin America does not meet the quantitative threshold to qualify as a reportable segment and is disclosed as “Other” herein. Each segment provides out-of-home advertising services in its respective geographic region using various digital and traditional display types.
Our Board of Directors has authorized a review of strategic alternatives for our European business, including a possible sale. However, there can be no assurance that this strategic review will result in any transaction or particular outcome. We have not set a timetable for completion of this strategic review, may suspend the process at any time and do not intend to make further announcements regarding the process unless and until our Board of Directors approves a course of action for which further disclosure is appropriate.
Macroeconomic Indicators, Seasonality and Recent Developments
Advertising for our business is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP, both domestically and internationally. Additionally, our international results are impacted by the economic conditions in the foreign markets in which we have operations and fluctuations in foreign currency exchange rates.
Due to seasonality, the results for the interim period are not indicative of expected results for the full year. We typically experience our weakest financial performance in the first quarter of the calendar year, which is generally offset during the remainder of the year as our business typically experiences its strongest performance in the second and fourth quarters of the calendar year.
16
As described in our 2021 Annual Report on Form 10-K, COVID-19 had a significant adverse impact on our results of operations during the first quarter of 2021. However, we saw positive trends in revenue for each of our segments during the remainder of 2021 as the relaxation of COVID-19 restrictions and increased vaccination levels led to an increase in mobility and increased time spent out-of-home. Beginning in the fourth quarter of 2021, we experienced a return to our pre-COVID-19 historical seasonal levels of revenue. To a large extent, we continued to experience similar levels of activity during the first quarter of 2022. As our operating performance has improved, we have ceased certain of the temporary operating cost savings initiatives we implemented in response to COVID-19 and have increased our investment in our business through additional capital expenditures. However, we continue to manage our cost base, including negotiating rent abatements in some of the markets in which we operate that have been most affected by COVID-19.
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 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 total company basis and are, therefore, included only in our discussion of consolidated results.
Revenue and expenses “excluding the impact of movements in foreign exchange rates” in this MD&A are presented because 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 foreign exchange rates for the comparable period.
Consolidated Results of Operations
The comparison of our historical results of operations for the three months ended March 31, 2022 to the three months ended March 31, 2021 is as follows:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2022 | 2021 | Change | |||||||||||||||
Revenue | $ | 525,688 | $ | 370,908 | 41.7% | ||||||||||||
Operating expenses: | |||||||||||||||||
Direct operating expenses(1)
|
321,202 | 283,290 | 13.4% | ||||||||||||||
Selling, general and administrative expenses(1)
|
108,957 | 97,570 | 11.7% | ||||||||||||||
Corporate expenses(1)
|
43,645 | 34,042 | 28.2% | ||||||||||||||
Depreciation and amortization | 60,407 | 61,852 | (2.3)% | ||||||||||||||
Impairment charges | — | 118,950 | |||||||||||||||
Other operating expense (income), net | (4,911) | 117 | |||||||||||||||
Operating loss | (3,612) | (224,913) | |||||||||||||||
Interest expense, net | (82,798) | (92,693) | |||||||||||||||
Loss on extinguishment of debt | — | (51,101) | |||||||||||||||
Other income (expense), net | (5,999) | 6,554 | |||||||||||||||
Loss before income taxes | (92,409) | (362,153) | |||||||||||||||
Income tax benefit | 2,680 | 28,697 | |||||||||||||||
Consolidated net loss | (89,729) | (333,456) | |||||||||||||||
Less amount attributable to noncontrolling interest |
139 | (1,103) | |||||||||||||||
Net loss attributable to the Company | $ | (89,868) | $ | (332,353) |
(1)Excludes depreciation and amortization.
17
Consolidated Revenue
Consolidated revenue increased $154.8 million, or 41.7%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $13.2 million impact of movements in foreign exchange rates, consolidated revenue increased $168.0 million, or 45.3%. During the first quarter of 2021, revenue throughout our business was adversely affected by COVID-19. As restrictions have been lifted and mobility levels have increased, we have seen increases in revenue across our portfolio.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses increased $37.9 million, or 13.4%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $11.3 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $49.2 million, or 17.4%, primarily due to higher site lease expense driven by higher revenue and lower negotiated rent abatements and governmental rent subsidies. The remaining increase was driven by higher production, maintenance and installation expenses.
The following table provides additional information about certain drivers of consolidated direct operating expenses for the three months ended March 31, 2022 and 2021:
(In thousands) | Three Months Ended March 31, |
||||||||||
2022 | 2021 | ||||||||||
Reductions of rent expense on lease and non-lease contracts from negotiated rent abatements |
$ | 12,422 | $ | 22,652 | |||||||
Restructuring and other costs(1)
|
4 | 897 |
(1)Includes severance and related costs for our restructuring plans to reduce headcount of $(0.3) million and $0.3 million during the three months ended March 31, 2022 and 2021, respectively.
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses increased $11.4 million, or 11.7%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $3.3 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $14.6 million, or 15.0%, primarily driven by higher employee compensation costs due to improvements in operating performance.
The following table provides the restructuring and other costs included within SG&A expenses during the three months ended March 31, 2022 and 2021:
(In thousands) | Three Months Ended March 31, |
||||||||||
2022 | 2021 | ||||||||||
Restructuring and other costs(1)
|
430 | 1,821 |
(1)Includes severance and related costs for our restructuring plans to reduce headcount of $0.1 million and $1.4 million during the three months ended March 31, 2022 and 2021, respectively.
Corporate Expenses
Corporate expenses increased $9.6 million, or 28.2%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $0.1 million impact from movements in foreign exchange rates, corporate expenses increased $9.7 million, or 28.6%, due to higher restructuring and other costs primarily from an increase in estimated legal liabilities, higher incentive compensation on improved operating performance and higher employee health benefit costs.
18
The following table provides additional information about certain drivers of corporate expenses for the three months ended March 31, 2022 and 2021:
(In thousands) | Three Months Ended March 31, |
||||||||||
2022 | 2021 | ||||||||||
Share-based compensation expense | $ | 4,714 | $ | 3,951 | |||||||
Restructuring and other costs(1)
|
9,070 | 4,654 |
(1)Includes severance and related costs for our restructuring plans to reduce headcount of $0.9 million during the three months ended March 31, 2021.
Depreciation and Amortization
Depreciation and amortization decreased $1.4 million, or 2.3%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $1.2 million impact of movements in foreign exchange rates, depreciation and amortization decreased $0.2 million, or 0.4%.
Impairment Charges
During the three months ended March 31, 2021, we recognized impairment charges of $119.0 million on our Americas indefinite-lived permits, driven by an increase in the discount rate and reduction in projected cash flows related to the negative impacts of COVID-19. We did not recognize any impairment charges during the three months ended March 31, 2022.
Other Operating Expense (Income), Net
Other operating income, net, of $4.9 million during the three months ended March 31, 2022 was driven 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 Americas segment. This was partially offset by costs related to the strategic review of our Europe segment. Other operating expense, net, was $0.1 million during the three months ended March 31, 2021.
Interest Expense, Net
Interest expense, net, decreased $9.9 million during the three months ended March 31, 2022 compared to the same period of 2021, driven by lower interest rates as a result of the refinancing of the Clear Channel Worldwide Holdings, Inc. 9.25% Senior Notes Due 2024 (the “CCWH Senior Notes”) in 2021 and, to a lesser extent, repayment of the $130.0 million draw under our Revolving Credit Facility in the fourth quarter of 2021.
Loss on Extinguishment of Debt
During the three months ended March 31, 2021, we recognized a loss on extinguishment of debt of $51.1 million related to the partial redemption of the CCWH Senior Notes. We did not extinguish any debt during the three months ended March 31, 2022.
Other Income (Expense), Net
For the three months ended March 31, 2022 and 2021, we recognized other expense, net, of $6.0 million and other income, net, of $6.6 million, respectively, primarily related to net foreign exchange losses and gains recognized in connection with intercompany notes denominated in foreign currencies.
Income Tax Benefit
The effective tax rates for three months ended March 31, 2022 and 2021 were 2.9% and 7.9%, respectively. These rates 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.
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Americas Results of Operations
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2022 | 2021 | Change | |||||||||||||||
Revenue | $ | 295,139 | $ | 211,884 | 39.3% | ||||||||||||
Direct operating expenses(1)
|
133,088 | 105,831 | 25.8% | ||||||||||||||
SG&A expenses(1)
|
52,059 | 42,855 | 21.5% | ||||||||||||||
Segment Adjusted EBITDA | 110,336 | 64,220 | 71.8% | ||||||||||||||
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.
Americas Revenue
Americas revenue increased $83.3 million, or 39.3%, during the three months ended March 31, 2022 compared to the same period of 2021. Americas revenue was adversely affected by COVID-19 during the first quarter of 2021. However, as our Americas segment recovered, we have seen increases in revenue across all of our products, most notably airport displays, which increased 186.6% to $55.9 million as compared to $19.5 million during the same period of 2021, and print and digital billboards.
Americas total digital revenue increased 68.3% during the three months ended March 31, 2022 as compared to the same period of 2021, as follows:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2022 | 2021 | Change | |||||||||||||||
Digital revenue from billboards, street furniture and spectaculars |
$ | 75,247 | $ | 56,261 | 33.7% | ||||||||||||
Digital revenue from transit, including airports | 30,666 | 6,678 | 359.2% | ||||||||||||||
Total digital revenue | $ | 105,913 | $ | 62,939 | 68.3% |
Revenue generated from national sales comprised 38.9% and 36.0% of total revenue for the three months ended March 31, 2022 and 2021, respectively, while the remainder of revenue was generated from local sales.
Americas Expenses
Americas direct operating expenses increased $27.3 million, or 25.8%, during the three months ended March 31, 2022 compared to the same period of 2021, primarily due to higher site lease expense driven by higher revenue and, to a lesser extent, lower negotiated rent abatements. Americas site lease expense increased 29.4% to $107.9 million during the three months ended March 31, 2022 as compared to $83.4 million during the same period of 2021.
Americas SG&A expenses increased $9.2 million, or 21.5%, during the three months ended March 31, 2022 compared to the same period of 2021, largely due to higher employee compensation costs driven by improvements in operating performance.
Europe Results of Operations
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2022 | 2021 | Change | |||||||||||||||
Revenue | $ | 217,072 | $ | 149,524 | 45.2% | ||||||||||||
Direct operating expenses(1)
|
178,959 | 169,482 | 5.6% | ||||||||||||||
SG&A expenses(1)
|
51,957 | 49,367 | 5.2% | ||||||||||||||
Segment Adjusted EBITDA | (13,754) | (67,629) | 79.7% |
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.
20
Europe Revenue
Europe revenue increased $67.5 million, or 45.2%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $13.1 million impact of movements in foreign exchange rates, Europe revenue increased $80.7 million, or 53.9%. Europe revenue was adversely affected by COVID-19 during the first quarter of 2021 due to widespread lockdowns and mobility restrictions. However, as restrictions have been largely lifted, we have seen increased mobility and corresponding increases in revenue across our products, most notably street furniture, and in all of the countries in which we operate, with the largest increases in the U.K. and France.
Europe digital revenue increased 89.4% during the three months ended March 31, 2022 as compared to the same period of 2021. Excluding the impact of movements in foreign exchange rates, Europe digital revenue increased 98.9%, as follows:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2022 | 2021 | Change | |||||||||||||||
Digital revenue |
$ | 80,664 | $ | 42,596 | 89.4% | ||||||||||||
Digital revenue, excluding movements in foreign exchange rates | 84,719 | 42,596 | 98.9% |
Europe Expenses
Europe direct operating expenses increased $9.5 million, or 5.6%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $11.1 million impact of movements in foreign exchange rates, Europe direct operating expenses increased $20.6 million, or 12.2%, largely driven by higher site lease expense, which increased 6.7% to $108.5 million during the three months ended March 31, 2022 as compared to $101.6 million during the same period of 2021. Excluding the $6.7 million impact of movements in foreign exchange rates, Europe site lease expense increased $13.5 million, or 13.3%, driven by higher revenue and lower negotiated rent abatements and governmental rent subsidies. The remaining increase was primarily driven by higher production, maintenance and installation expenses.
Europe SG&A expenses increased $2.6 million, or 5.2%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $3.2 million impact of movements in foreign exchange rates, Europe SG&A expenses increased $5.8 million, or 11.7%, due to higher employee compensation costs driven by improvements in operating performance and lower governmental support and wage subsidies.
Other Results of Operations
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2022 | 2021 | Change | |||||||||||||||
Revenue | $ | 13,477 | $ | 9,500 | 41.9% | ||||||||||||
Direct operating expenses(1)
|
9,155 | 7,977 | 14.8% | ||||||||||||||
SG&A expenses(1)
|
4,941 | 5,348 | (7.6)% | ||||||||||||||
Segment Adjusted EBITDA | (619) | (3,825) | 83.8% |
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.
Other revenue increased $4.0 million, or 41.9%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $0.1 million impact of movements in foreign exchange rates, Other revenue increased $4.1 million, or 43.3%, driven by our continued recovery from COVID-19 in Latin America.
Other direct operating expenses increased $1.2 million, or 14.8%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $0.1 million impact of movements in foreign exchange rates, Other direct operating expenses increased $1.3 million, or 16.6%, primarily driven by higher site lease expense related to higher revenue.
Other SG&A expenses decreased $0.4 million, or 7.6%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $0.1 million impact of movements in foreign exchange rates, Other SG&A expenses decreased $0.3 million, or 6.3%.
21
LIQUIDITY AND CAPITAL RESOURCES
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