10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 9, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023
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.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
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 4, 2023 | ||||
- - - - - - - - - - - - - - - - - - - - - - - - - - | - - - - - - - - - - - - - - - - - - - - - - - - - - | ||||
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, 2023 |
December 31, 2022 |
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(Unaudited) | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Prepaid expenses | |||||||||||
Other current assets | |||||||||||
Assets held for sale | |||||||||||
Total Current Assets | |||||||||||
PROPERTY, PLANT AND EQUIPMENT | |||||||||||
Structures, net | |||||||||||
Other property, plant and equipment, net | |||||||||||
INTANGIBLE ASSETS AND GOODWILL | |||||||||||
Permits, net | |||||||||||
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 | |||||||||||
Liabilities held for sale | |||||||||||
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 interests | |||||||||||
Common stock, par value $ |
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Additional paid-in capital | |||||||||||
Accumulated deficit | ( |
( |
|||||||||
Accumulated other comprehensive loss | ( |
( |
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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)
Three Months Ended | |||||||||||
(In thousands, except per share data) | March 31, | ||||||||||
2023 | 2022 | ||||||||||
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 | |||||||||||
Other operating income, net | ( |
( |
|||||||||
Operating income (loss) | ( |
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Interest expense, net | ( |
( |
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Other income (expense), net | ( |
||||||||||
Loss before income taxes | ( |
( |
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Income tax benefit (expense) | ( |
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Consolidated net loss | ( |
( |
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Less amount attributable to noncontrolling interests | ( |
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Net loss attributable to the Company | $ | ( |
$ | ( |
|||||||
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)
Three Months Ended | |||||||||||
(In thousands) | March 31, | ||||||||||
2023 | 2022 | ||||||||||
Net loss attributable to the Company | $ | ( |
$ | ( |
|||||||
Foreign currency translation adjustments | ( |
||||||||||
Reclassification adjustment for realized gains from cumulative translation adjustments and pension related to sale of Swiss business, included in “Other operating income, net” | ( |
||||||||||
Comprehensive loss | ( |
( |
|||||||||
Less amount attributable to noncontrolling interests | ( |
||||||||||
Comprehensive loss attributable to the Company | $ | ( |
$ | ( |
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, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Controlling Interest | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | Common Shares Issued | Non-controlling Interests | Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net loss | ( |
— | — | ( |
— | — | ( |
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Release of stock awards and exercise of stock options | — | ( |
— | — | ( |
( |
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Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments from noncontrolling interests | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | ( |
— | ( |
|||||||||||||||||||||||||||||||||||||||||
Disposal of Swiss business | — | — | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2023 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Controlling Interest | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | Common Shares Issued | Non-controlling Interests | Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2021 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Release of stock awards and exercise of stock options | — | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | ( |
— | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
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, | ||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Consolidated net loss | $ | ( |
$ | ( |
|||||||
Reconciling items: | |||||||||||
Depreciation and amortization | |||||||||||
Non-cash operating lease expense | |||||||||||
Deferred taxes | ( |
||||||||||
Share-based compensation | |||||||||||
Net gain on disposal of business and operating assets | ( |
( |
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Foreign exchange transaction loss (gain) | ( |
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Other reconciling items, net | |||||||||||
Changes in operating assets and liabilities, net of effects of disposition: | |||||||||||
Decrease in accounts receivable | |||||||||||
Increase in prepaid expenses and other operating assets | ( |
( |
|||||||||
Decrease in accounts payable and accrued expenses | ( |
( |
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Decrease in operating lease liabilities | ( |
( |
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Increase in accrued interest | |||||||||||
Increase in deferred revenue | |||||||||||
Increase in other operating liabilities | |||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | ( |
( |
|||||||||
Asset acquisitions | ( |
( |
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Net proceeds from disposal of business and assets | |||||||||||
Other investing activities, net | ( |
||||||||||
Net cash provided by (used for) investing activities | ( |
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Cash flows from financing activities: | |||||||||||
Payments on long-term debt | ( |
( |
|||||||||
Taxes paid related to net share settlement of equity awards | ( |
( |
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Other financing activities, net | ( |
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Net cash used for financing activities | ( |
( |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( |
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Net increase 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
These 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 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 2022 Annual Report on Form 10-K, filed with the SEC on February 28, 2023.
The Company’s consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
As described in the Company’s 2022 Annual Report on Form 10-K, the Company changed segments during the fourth quarter of 2022 to reflect changes in the way the business is managed and resources are allocated by the Company’s chief operating decision maker (“CODM”). As such, the Company has revised its segment disclosures for prior periods to conform to the current period presentation. Additionally, certain prior period amounts in the Consolidated Statement of Cash Flows have been reclassified to conform to the 2023 presentation.
Disposition
As disclosed in the Company’s 2022 Annual Report on Form 10-K, in December 2022, Clear Channel International Limited, a wholly-owned subsidiary of the Company, entered into a definitive agreement to sell its business in Switzerland to Goldbach Group AG. As such, assets and liabilities of the Company’s business in Switzerland were presented as held for sale on the Company’s Consolidated Balance Sheet as of December 31, 2022.
The conditions to closing were satisfied during the first quarter of 2023, and the sale of the Company’s business in Switzerland was completed on March 31, 2023. The Company recognized a gain on sale of $96.4 million, recorded within “Other operating income, net” on the Consolidated Statement of Loss for the three months ended March 31, 2023. Gross cash proceeds of $94.2 million are reflected as cash from investing activities within “Net proceeds from disposal of business and assets” on the Consolidated Statement of Cash Flows for the three months ended March 31, 2023.
NOTE 2 – SEGMENT DATA
The Company has four reportable segments, which it believes best reflect how the Company is currently managed: America, Airports, Europe-North and Europe-South. The Company's remaining operations in Latin America and Singapore are disclosed as “Other.”
Segment Adjusted EBITDA is the profitability metric reported to the Company’s 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 segments.
8
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) | Three Months Ended March 31, | ||||||||||
2023 | 2022 | ||||||||||
Revenue | |||||||||||
America | $ | $ | |||||||||
Airports | |||||||||||
Europe-North | |||||||||||
Europe-South | |||||||||||
Other | |||||||||||
Total | $ | $ | |||||||||
Capital Expenditures(1)
|
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America | $ | $ | |||||||||
Airports | |||||||||||
Europe-North | |||||||||||
Europe-South | |||||||||||
Other | |||||||||||
Corporate | |||||||||||
Total | $ | $ | |||||||||
Segment Adjusted EBITDA | |||||||||||
America | $ | $ | |||||||||
Airports | |||||||||||
Europe-North | |||||||||||
Europe-South | ( |
( |
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Other | |||||||||||
Total | $ | $ | |||||||||
Reconciliation of Segment Adjusted EBITDA to Consolidated Net Loss Before Income Taxes | |||||||||||
Segment Adjusted EBITDA | $ | $ | |||||||||
Less reconciling items: | |||||||||||
Corporate expenses(2)
|
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Depreciation and amortization | |||||||||||
Restructuring and other costs(3)
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Other operating income, net | ( |
( |
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Interest expense, net | |||||||||||
Other expense (income), net | ( |
||||||||||
Consolidated net loss before income taxes | $ | ( |
$ | ( |
(1)In addition to payments that occurred during the period for capital expenditures, as disclosed here and in the Consolidated Statements of Cash Flows, the Company had $18.0 million and $16.6 million of accrued capital expenditures that remained unpaid as of March 31, 2023 and 2022, respectively.
(2)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.
(3)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.
9
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 Accounting Standards Codification (“ASC”) Topic 842, while the Company’s remaining revenue transactions are accounted for as revenue from contracts with customers in accordance with ASC Topic 606.
Disaggregation of Revenue
The following table shows revenue from contracts with customers, revenue from leases and total revenue, disaggregated by geography, for the three months ended March 31, 2023 and 2022:
(In thousands) | Revenue from contracts with customers | Total revenue | |||||||||||||||
Three Months Ended March 31, 2023 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
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Other(3)
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Total | $ | $ | $ | ||||||||||||||
Three Months Ended March 31, 2022 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
|
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Other(3)
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Total | $ | $ | $ |
(1)U.S. revenue, which also includes revenue derived from airport displays in the Caribbean, is comprised of revenue from the Company’s America and Airports segments.
(2)Europe revenue is comprised of revenue from the Company’s Europe-North and Europe-South segments.
(3)Other includes the Company’s businesses in Latin America and Singapore.
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) |
2023(1)
|
2022 | |||||||||
Accounts receivable, net of allowance, from contracts with customers: | |||||||||||
Beginning balance | $ | $ | |||||||||
Ending balance | |||||||||||
Deferred revenue from contracts with customers: | |||||||||||
Beginning balance | $ | $ | |||||||||
Ending balance |
(1)The beginning balances for the three months ended March 31, 2023 exclude accounts receivable and deferred revenue from contracts with customers that were held for sale as of December 31, 2022.
During the three months ended March 31, 2023 and 2022, respectively, the Company recognized $26.0 million and $32.3 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective year.
10
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 – LONG-TERM DEBT
Long-term debt outstanding as of March 31, 2023 and December 31, 2022 consisted of the following:
(In thousands) | March 31, 2023 |
December 31, 2022 |
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Term Loan Facility Due 2026(1),(2)
|
$ | $ | |||||||||
Revolving Credit Facility Due 2024 | |||||||||||
Receivables-Based Credit Facility Due 2024 | |||||||||||
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(3)
|
|||||||||||
Original issue discount | ( |
( |
|||||||||
Long-term debt fees | ( |
( |
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Total debt | |||||||||||
Less: Current portion | |||||||||||
Total long-term debt | $ | $ |
(1)The term loans under the Term Loan Facility amortize in equal quarterly installments in an aggregate annual amount equal to 1.00 % of the original principal amount of such term loans, with the balance being payable on August 23, 2026. In accordance with these terms, the Company paid $5.0 million of the outstanding principal on the Term Loan Facility during the three months ended March 31, 2023.
(2)On February 20, 2023, the Senior Secured Credit Agreement was amended to establish Adjusted Term Secured Overnight Financing Rate (“SOFR”) (as defined therein) as the alternate rate of interest applicable to the Company’s Term Loan Facility in connection with the cessation of London Interbank Offered Rate (“LIBOR”). Please refer to the Company’s 2022 Annual Report on Form 10-K for additional details regarding this amendment.
(3)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 $32.5 million at current exchange rates.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $4.8 billion and $4.7 billion as of March 31, 2023 and December 31, 2022, respectively. Under the fair value hierarchy established by ASC Section 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, 2023, the Company was in compliance with all covenants contained in its debt agreements.
Letters of Credit, Surety Bonds and Guarantees
As of March 31, 2023, 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, and $43.1 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $73.5 million of excess availability. Additionally, as of March 31, 2023, the Company had $86.0 million and $32.1 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $9.0 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
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 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 U.S. Department of Justice (the “DOJ”) of the investigation of Clear Media and continues to cooperate with these agencies. Subsequent to the announcement that the Company was considering a strategic review of its stake in Clear Media, in March 2020, the Company 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, 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.
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 is 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.
NOTE 6 – INCOME TAXES
Income Tax Benefit (Expense)
The Company’s income tax benefit (expense) for the three months ended March 31, 2023 and 2022 consisted of the following components:
(In thousands) | Three Months Ended March 31, | ||||||||||
2023 | 2022 | ||||||||||
Current tax benefit (expense) | $ | ( |
$ | ||||||||
Deferred tax benefit (expense) | ( |
||||||||||
Income tax benefit (expense) | $ | ( |
$ |
12
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT
The Company’s property, plant and equipment consisted of the following classes of assets as of March 31, 2023 and December 31, 2022:
(In thousands) | March 31, 2023 |
December 31, 2022 |
|||||||||
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, 2023 and December 31, 2022:
(In thousands) | March 31, 2023 | December 31, 2022 | |||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||
Permits(1)
|
$ | $ | ( |
$ | $ | ( |
|||||||||||||||||
Transit, street furniture and other outdoor contractual rights | ( |
( |
|||||||||||||||||||||
Permanent easements(1)
|
|||||||||||||||||||||||
Trademarks | ( |
( |
|||||||||||||||||||||
Other | ( |
( |
|||||||||||||||||||||
Total intangible assets | $ | $ | ( |
$ | $ | ( |
(1)During the three months ended March 31, 2023, the Company acquired permits and permanent easements of $3.5 million and $2.1 million, respectively, as part of asset acquisitions. The acquired permit has an amortization period of 16 years.
Goodwill
The following table presents changes in the goodwill balance for the Company’s segments with goodwill during the three months ended March 31, 2023:
(In thousands) | America | Airports | Europe-North | Consolidated | |||||||||||||||||||
Balance as of December 31, 2022(1)
|
$ | $ | $ | $ | |||||||||||||||||||
Foreign currency impact | |||||||||||||||||||||||
Balance as of March 31, 2023 | $ | $ | $ | $ |
(1)The balance at December 31, 2022 is net of cumulative impairments of $2.6 billion for America, $79.4 million for Europe-North, $128.9 million for Europe-South and $90.4 million for Other.
13
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 business, which was executed through the fourth quarter of 2021 when the impacted employees were terminated. Since then, any additional costs incurred, or in some cases reversed, related to residual restructuring activity in the Company’s Europe-South segment. As of March 31, 2023, the Company had incurred cumulative costs of $37.4 million in its Europe-South segment in connection with this restructuring plan. Substantially all costs have been severance benefits and related costs, and remaining costs associated with this restructuring plan are not expected to be significant.
As of March 31, 2023, the remaining liability related to this restructuring plan was $5.7 million. The Company expects to pay most of this balance by the end of 2023. The following table presents changes in this liability balance during the three months ended March 31, 2023:
(In thousands) | Europe-South | ||||
Liability balance as of December 31, 2022 |
$ | ||||
Costs incurred, net(1)
|
|||||
Costs paid or otherwise settled | ( |
||||
Foreign currency impact | |||||
Liability balance as of March 31, 2023 |
$ |
(1)Costs are reported in “Direct operating expenses” and “Selling, general and administrative expenses” on the Consolidated Statements of Loss. They are categorized as Restructuring and other costs and are therefore excluded from Segment Adjusted EBITDA.
NOTE 10 – NET LOSS PER SHARE
The following table presents the computation of net loss per share for the three months ended March 31, 2023 and 2022:
(In thousands, except per share data) | Three Months Ended March 31, |
||||||||||
2023 | 2022 | ||||||||||
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 19.2 million and 27.6 million for the three months ended March 31, 2023 and 2022, respectively, were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.
14
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 — OTHER INFORMATION
Reconciliation of Cash, Cash Equivalents and 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, 2023 |
December 31, 2022 |
|||||||||
Cash and cash equivalents in the Balance Sheets | $ | $ | |||||||||
Cash and cash equivalents included in Assets held for sale | |||||||||||
Restricted cash included in: | |||||||||||
Other current assets | |||||||||||
Assets held for sale | |||||||||||
Other assets | |||||||||||
Total cash, cash equivalents and restricted cash in the Statements of Cash Flows | $ | $ |
Accounts Receivable
The following table discloses the components of “Accounts receivable, net,” as reported in the Consolidated Balance Sheets:
(In thousands) | March 31, 2023 |
December 31, 2022 |
|||||||||
Accounts receivable | $ | $ | |||||||||
Less: Allowance for credit losses | ( |
( |
|||||||||
Accounts receivable, net | $ | $ |
Credit loss expense related to accounts receivable was $2.7 million and $0.3 million during the three months ended March 31, 2023 and 2022, respectively. The increase was driven by specific reserves for certain customers.
Share-Based Compensation
On May 2, 2023, the Compensation Committee of the Company’s Board of Directors approved grants of 15.0 million restricted stock units (“RSUs”) and 3.4 million performance stock units (“PSUs”) to certain of its employees.
•The RSUs generally vest in three equal annual installments on each of April 1, 2024, April 1, 2025 and April 1, 2026, provided that the recipient is still employed by, or providing services to, the Company on each such vesting date.
•The PSUs vest and become earned based on the achievement of the Company’s total shareholder return relative to the Company’s peer group (the “Relative TSR”) over a performance period commencing on April 1, 2023 and ending on March 31, 2026 (the “Performance Period”). If the Company achieves Relative TSR at the 75th percentile or higher, the PSUs will be earned at 150 % of the target number of shares; if the Company achieves Relative TSR at the 50th percentile, the PSUs will be earned at 100 % of the target number of shares; if the Company achieves Relative TSR at the 25th percentile, the PSUs will be earned at 50 % of the target number of shares; and if the Company achieves Relative TSR below the 25th percentile, no PSUs will be earned. To the extent Relative TSR is between achievement levels, the portion of the PSUs that is earned will be determined using straight-line interpolation. Notwithstanding the foregoing, to the extent the Company’s absolute total shareholder return over the Performance Period is less than 0 %, the maximum payout shall not be greater than 100 % of the target number of shares. The PSUs are considered market-condition awards pursuant to ASC Topic 260, Earnings Per Share.
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, 2023 and 2022.
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 Part I of this Quarterly Report on Form 10-Q and the Company's 2022 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 out-of-home displays we own or operate in key markets worldwide using various digital and traditional display types. Effective December 31, 2022, we have four reportable business segments: America, which consists of our U.S. operations excluding airports; Airports, which includes revenue from U.S. and Caribbean airports; Europe-North, which consists of operations in the United Kingdom (the “U.K.”), the Nordics and several other countries throughout northern and central Europe; and Europe-South, which consists of operations in France, Switzerland (prior to its sale on March 31, 2023), Spain and Italy. Our remaining operations in Latin America and Singapore are disclosed as “Other.” We have conformed the segment disclosures for the prior period in this MD&A and throughout this Quarterly Report on Form 10-Q to the current period presentation.
Macroeconomic Trends and Seasonality
As described in our 2022 Annual Report on Form 10-K, global inflation increased in 2022, and in response, central banks, including the U.S. Federal Reserve, raised interest rates significantly, resulting in an increase in our weighted average cost of debt. Interest rates have continued to rise in the first quarter of 2023, and while inflation rates have slowed, global inflation remains high and has impacted our results due to higher costs, particularly in Europe. We believe we have partially offset these higher costs by increasing the effective advertising rates for our products.
Additionally, our international results are impacted by the economic conditions in the foreign markets in which we operate and by fluctuations in foreign currency exchange rates. During 2022, the U.S. dollar significantly strengthened against the Euro and British pound sterling, among other European currencies, peaking in the third quarter. The U.S. dollar has since trended weaker, and fluctuations in foreign currency exchange rates did not have a significant impact on our reported results in the first quarter of 2023. While inflation, interest rates and foreign currency exchange rates may be less volatile in 2023, fluctuations in these indicators are uncertain and could result in further adverse impacts to our reported results. The market risks that our business is subject to are further described in Item 3 of Part I of this Quarterly Report on Form 10-Q.
Subsequent to the filing of our 2022 Annual Report on Form 10-K on February 28, 2023, the U.S. banking market experienced increased volatility as a result of several distressed or closed banks. While we have not realized any losses as a result of this increased market volatility, we continue to monitor the situation and will take appropriate measures, as necessary, to minimize potential risk exposure to our customers’ and our cash and investment balances.
We believe the out-of-home industry has demonstrated resilience from macroeconomic events, and during the first quarter of 2023, we observed healthy demand from advertisers. However, we expect country level growth rates to vary throughout the year. During the quarter, we saw some weakness within the U.S. due to specific issues impacting certain national accounts that we do not believe are related to broader macroeconomic events.
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
Disposition and Strategic Reviews
As described in our 2022 Annual Report on Form 10-K, we entered into an agreement in December 2022 to sell our business in Switzerland to Goldbach Group AG. On March 31, 2023, we completed this sale and received gross proceeds of $94.2 million.
Our reviews of strategic alternatives for our other European businesses, including the potential disposal of certain of our European assets, remain ongoing. However, there can be no assurance that these reviews will result in any transactions or particular outcomes. We have not set a timetable for completion of these reviews, may suspend the processes at any time and do not intend to make further announcements regarding these processes unless and until our Board of Directors approves a specific course of action for which further disclosure is appropriate.
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, 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 monthly foreign exchange rates for the same period of the prior year.
Consolidated Results of Operations
(In thousands) | Three Months Ended March 31, |
% | ||||||||||||||||||
2023 | 2022 | Change | ||||||||||||||||||
Revenue | $ | 545,435 | $ | 525,688 | 3.8% | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Direct operating expenses(1)
|
344,850 | 321,202 | 7.4% | |||||||||||||||||
Selling, general and administrative expenses(1)
|
118,196 | 108,957 | 8.5% | |||||||||||||||||
Corporate expenses(1)
|
34,541 | 43,645 | (20.9)% | |||||||||||||||||
Depreciation and amortization | 72,963 | 60,407 | 20.8% | |||||||||||||||||
Other operating income, net | (91,276) | (4,911) | ||||||||||||||||||
Operating income (loss) | 66,161 | (3,612) | ||||||||||||||||||
Interest expense, net | (102,753) | (82,798) | ||||||||||||||||||
Other income (expense), net | 9,004 | (5,999) | ||||||||||||||||||
Loss before income taxes | (27,588) | (92,409) | ||||||||||||||||||
Income tax benefit (expense) | (7,834) | 2,680 | ||||||||||||||||||
Consolidated net loss | (35,422) | (89,729) | ||||||||||||||||||
Less amount attributable to noncontrolling interest |
(510) | 139 | ||||||||||||||||||
Net loss attributable to the Company | $ | (34,912) | $ | (89,868) |
(1)Excludes depreciation and amortization
17
Consolidated Revenue
Consolidated revenue increased $19.7 million, or 3.8%, during the three months ended March 31, 2023 compared to the same period of 2022. Excluding the $15.2 million impact of movements in foreign exchange rates, consolidated revenue increased $34.9 million, or 6.6%, driven by increased demand in our Europe-North and Europe-South segments.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses increased $23.6 million, or 7.4%, during the three months ended March 31, 2023 compared to the same period of 2022. Excluding the $12.3 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $35.9 million, or 11.2%, largely due to higher site lease expense mainly driven by new and amended lease contracts and higher revenue. We also incurred higher production, installation and maintenance expenses largely driven by higher prices and increased sales activity in Europe.
The following table provides additional information about certain drivers of consolidated direct operating expenses:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Site lease expense | $ | 240,312 | $ | 222,164 | 8.2 | % | |||||||||||
Site lease expense, excluding movements in foreign exchange rates | 247,601 | 222,164 | 11.4 | % | |||||||||||||
Reductions of rent expense on lease and non-lease contracts from rent abatements |
7,273 | 9,603 | (24.3) | % | |||||||||||||
Restructuring and other costs | 508 | 4 |
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses increased $9.2 million, or 8.5%, during the three months ended March 31, 2023 compared to the same period of 2022. Excluding the $3.2 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $12.5 million, or 11.4%, most notably driven by higher employee compensation costs, higher credit loss expense due to specific reserves for certain customers, and higher marketing costs.
The following table provides the restructuring and other costs included within SG&A expenses during the three months ended March 31, 2023 and 2022:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Restructuring and other costs | $ | 53 | $ | 430 | (87.7) | % |
Corporate Expenses
Corporate expenses decreased $9.1 million, or 20.9%, during the three months ended March 31, 2023 compared to the same period of 2022. Excluding the $0.8 million impact from movements in foreign exchange rates, corporate expenses decreased $8.3 million, or 19.0%, due to lower restructuring and other costs largely driven by estimated legal liabilities recorded in the first quarter of 2022.
The following table provides additional information about certain drivers of corporate expenses:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Share-based compensation expense | $ | 4,124 | $ | 4,714 | (12.5) | % | |||||||||||
Restructuring and other costs (reversals) | (55) | 9,070 | (100.6) | % |
18
Depreciation and Amortization
Depreciation and amortization increased $12.6 million, or 20.8%, during the three months ended March 31, 2023 compared to the same period of 2022. Excluding the $1.2 million impact of movements in foreign exchange rates, depreciation and amortization increased $13.8 million, or 22.8%. The increase was driven by a change in the classification of billboard permit intangible assets in our America segment from indefinite-lived to finite-lived in the fourth quarter of 2022, which resulted in a $16.0 million increase in amortization expense during the three months ended March 31, 2023 compared to the same period of 2022. This was partially offset by the impact of other assets becoming fully depreciated.
Other Operating Income, Net
Other operating income, net, of $91.3 million during the three months ended March 31, 2023 was driven by a $96.4 million gain on the sale of our business in Switzerland, partially offset by costs related to the strategic reviews of our other Europe businesses.
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 America segment. This was partially offset by costs related to the strategic reviews of our Europe businesses.
Interest Expense, Net
Interest expense, net, increased $20.0 million during the three months ended March 31, 2023 compared to the same period of 2022 driven by higher interest rates on our Term Loan Facility.
Other Income (Expense), Net
Other income, net, of $9.0 million and other expense, net, of $6.0 million during the three months ended March 31, 2023 and 2022, respectively, primarily resulted from net foreign exchange gains and losses recognized in connection with intercompany notes denominated in a currency other than the functional currency, driven by fluctuations in the value of the U.S. dollar against foreign currencies, particularly the Euro and British pound sterling.
Income Tax Benefit (Expense)
The effective tax rates for the three months ended March 31, 2023 and 2022 were (28.4)% and 2.9%, 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. The effective tax rate for the three months ended March 31, 2023 was also impacted by the sale of the Company’s business in Switzerland.
America Results of Operations
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Revenue | $ | 236,049 | $ | 239,256 | (1.3)% | ||||||||||||
Direct operating expenses(1)
|
104,817 | 94,651 | 10.7% | ||||||||||||||
SG&A expenses(1)
|
49,881 | 44,543 | 12.0% | ||||||||||||||
Segment Adjusted EBITDA | 81,365 | 100,406 | (19.0)% | ||||||||||||||
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA
America Revenue
America revenue decreased $3.2 million, or 1.3%, during the three months ended March 31, 2023 compared to the same period of 2022. Lower revenue from print displays was partially offset by higher revenue from digital displays, which increased 3.6%, as follows:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Digital revenue | $ | 78,018 | $ | 75,332 | 3.6% | ||||||||||||
Percent of total segment revenue | 33.1 | % | 31.5 | % |
19
Revenue generated from national sales comprised 33.1% and 35.8% of America revenue for the three months ended March 31, 2023 and 2022, respectively, while the remainder of revenue was generated from local sales.
America Direct Operating Expenses
America direct operating expenses increased $10.2 million, or 10.7%, during the three months ended March 31, 2023 compared to the same period of 2022 primarily due to higher site lease expense mainly driven by new and amended lease contracts and lower rent abatements. The following table provides additional information about certain of these drivers:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Site lease expense |
$ | 83,030 | $ | 73,294 | 13.3% | ||||||||||||
Reductions of rent expense on lease and non-lease contracts from rent abatements | 1,204 | 3,667 | (67.2)% |
America SG&A Expenses
America SG&A expenses increased $5.3 million, or 12.0%, during the three months ended March 31, 2023 compared to the same period of 2022 largely due to higher credit loss expense driven by specific reserves for certain customers and higher employee compensation costs largely driven by increased headcount.
Airports Results of Operations
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Revenue | $ | 53,789 | $ | 55,883 | (3.7)% | ||||||||||||
Direct operating expenses | 39,651 | 38,437 | 3.2% | ||||||||||||||
SG&A expenses | 7,874 | 7,516 | 4.8% | ||||||||||||||
Segment Adjusted EBITDA | 6,264 | 9,930 | (36.9)% | ||||||||||||||
Airports Revenue
Airports revenue decreased $2.1 million, or 3.7%, during the three months ended March 31, 2023 compared to the same period of 2022 driven by the timing of campaign spending in certain airports. Digital revenue decreased 3.3% during the three months ended March 31, 2023 as compared to the same period of 2022, as follows:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Digital revenue | $ | 29,578 | $ | 30,581 | (3.3)% | ||||||||||||
Percent of total segment revenue | 55.0 | % | 54.7 | % |
Revenue generated from national sales comprised 60.1% and 55.2% of Airports revenue for the three months ended March 31, 2023 and 2022, respectively, while the remainder of revenue was generated from local sales.
Airports Direct Operating Expenses
Airports direct operating expenses increased $1.2 million, or 3.2%, during the three months ended March 31, 2023 compared to the same period of 2022 driven by higher site lease expense. The following table provides additional information about certain drivers of Airports direct operating expenses:
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Site lease expense |
$ | 36,250 | $ | 34,639 | 4.7% | ||||||||||||
Reductions of rent expense on lease and non-lease contracts from rent abatements | 5,507 | 4,602 | 19.7% |
20
Europe-North Results of Operations
(In thousands) | Three Months Ended March 31, |
% | |||||||||||||||
2023 | 2022 | Change | |||||||||||||||
Revenue | $ | 128,503 | $ | 122,098 | 5.2% | ||||||||||||
Direct operating expenses(1)
|
96,032 | 90,275 | 6.4% | ||||||||||||||
SG&A expenses(1)
|