Clear Channel Outdoor Holdings, Inc. (CCO) Earnings Call Transcript & Summary

Thank you for joining us for our next session. Very happy to have Clear Channel Outdoor back with us again this year. I'm Aaron Watts, the credit research analyst at Deutsche Bank. And from the Clear Channel team, we have William Eccleshare, CEO; Scott Wells, CEO of the Americas; and Brian Coleman, Chief Financial Officer. I've got a long list of questions, but if any investors do have questions today, they would like to submit, you can do that with the online system, and I will be keeping an eye out for those. But with that, I think we will get started. William, Scott, Brian, thank you for joining me today.

Thank you, Aaron.

Right. So William, I'll start with you. Over the past year, you've had to make several strategic pivots and tough operating decisions and the spirit of taking some good from bad, what are some of the learnings on the business you draw from this experience? Do you see the company is well-positioned to grow in the future as the recovery takes hold? And what are your main focus areas going to be over the next 12 to 18 months?

Right. Well, thank you, Aaron. Good morning. I could probably spend the next hour answering just your opening question because it's a full and rich menu of questions really. I mean, I think, impressive thing in your question is the fact that agility has been an absolutely critical aspect of good leadership for all businesses during the pandemic or certainly all businesses affected by the pandemic. Agility, as you say, the ability to pivot, the ability to react quickly has been key. And I'm really very proud of the way our business has reacted. What have I learned? I've learned that we have an astonishing group of people in our company, not just in the leadership roles, but right throughout our company, in their ability to adapt to a completely different way of working for most of them, and to adapt to a very different working environment and market context. So I would, first and foremost, pay tribute to our people. But the other thing I think that I've learned is that this sector out-of-home is remarkably resilient, and the ability it has had to bounce back from a really very, very challenging set of circumstances has been very noticeable and probably more dramatic than even we had expected. I mean in the early weeks of the restraints on movement that we saw across all of our markets as the pandemic hit last year, Aaron; in those early weeks, the number of people who kind of thought they were being very clever or very funny when they said to me, out-of-home and nobody is allowed out-of-home, so what's that doing to your business? I got slightly bored of those remarks, I have to admit. But what actually happened was that even with some very significant constraints on movement, the business actually continued to deliver revenue. And in some cases, delivered revenue that exceeded our expectations. But what is more important is that as the restraints were lifted and as in different markets around the world, people came back on to the street, advertisers came back because they wanted to greet those audiences. So that's probably the biggest single positive lesson that I take out of it. And it gives me great confidence for the year ahead of us and the year beyond that. So you asked about the main focus over the next 12 to 18 months. I mean, I think the first key focus for us is getting the business back into growth. As I said on the earnings call, we're confident that we will be able to do that as we get into Q2, the comps get pretty soft in Q2, and we will certainly be growing ahead of those comps that we saw in the second quarter of 2020 as the pandemic hit. I think making the case again for out-of-home, and why out-of-home is such a powerful medium is going to be key to all of our sales and commercial leaders over the course of this year. I mean, we saw very significant growth for out-of-home over the last 5 years prior to the pandemic hitting in almost all of the markets that we were operating, out-of-home was growing faster than any other traditional medium. I personally believe strongly that those changes that we saw throughout that period will come back. But I also believe that we have to accelerate the process of that return. And so making the case for the medium and demonstrating to advertisers that audiences are back and that the medium delivers really remarkable return on investment, that's going to be the key part of our focus. And then the other key parts are around continuing with our digital strategy, continuing to ensure that we convert as many digital screens as we're able to do in the United States, but we continue with our digital rollout plans in Europe and Latin America. So we continue to invest in data and data analytics that we continue our programmatic investments in our programmatic journey. Those are core strategic initiatives for us, and we will accelerate the process of those over the coming years. So I've probably taken longer than I should already, but that I think gives my summary of actions that we would take.

That's a great tone for the rest of the conversation and a lot to unpack there. One follow-up on that answer. William, I've often heard you speak about the out-of-home industry accounting for 5% to 6% of global ad spend, and I know you feel that should be a bigger number. Do you feel like given a lot of the themes going on through the pandemic and which sectors of media are recovering more so than others coming out of it, that you can finally see some real movement up on the market share for the out-of-home industry going forward?

I mean, I do believe that. I think what is very hard to predict at the moment is what the shape of that recovery will be. And I don't think -- I look at all of the industry forecast and I see what Magna say, and I see what others are saying in terms of the growth and when the growth returns. And I don't think it is possible at the moment to predict the speed of that recovery or the timing of that recovery. But what I do believe is there is nothing that has happened in the pandemic that would cause us to doubt that the kind of growth that we were seeing in terms of market share of total media, the kind of growth that we were seeing between 2014 and 2019, that will return. The -- I don't believe that there is going to be a structural disruption that would cause that to stop. There's nothing in what has happened during the pandemic that gives me any cause for doubt about the return to growth for our sector. I think digital will continue to be a significant driver of that growth. But I also think the other trends that we were seeing in pre-pandemic in terms of the fragmentation of TV, the decline of print media, those will continue. TV has had a -- in many markets in the world, TV has had a boost from the pandemic as people have been locked in their homes, not very surprising that they've watched more television. But I don't see that as a long-term change. I think in the market where we've seen an opening up, where lockdowns have been released, we've also seen TV viewing going back to the kinds of levels that it was at pre-pandemic. So I don't want to put a timing on the recovery. And I don't want to put a number in terms of where I think the total out-of-home market will get to. But I do believe everything that we have said in the past and will continue to say remains true in terms of the value the out-of-home has as a mass reach medium, its ability to reach audiences in large numbers that other media can't reach plus our greater ability to target because of our ability to use data and use data analytics to more accurately get to the audiences that advertisers want to reach. And those 2 things together give me every confidence in our growth trajectory for the sector and for Clear Channel's growth within that sector.

So that's a good segue to talk about digital a little bit more. I know that's one of the key drivers of growth for the company and the industry broadly, the common default is to think about digital boards, but there's a lot more to the digital aspects of the business today than in the past. What inning do you feel like you're in, in terms of the digital evolution, both in the U.S. and Europe? And what can we expect to see in the near future from the company?

Okay. Well, I think you've heard more than enough from me over the last 10 minutes. So I'm going to hand to Scott to talk about the U.S. for a bit, and then I'll come back and talk a bit about Europe.

Sure. Thanks, William. I think in the U.S., I'd characterize that it's still early, and it's early on a couple of dimensions. Right now, we are -- about 1/3 of our revenue is digital, and that's less than 5% of our assets. So we've converted really good locations. And the nature of the digital asset and our ability to monetize it causes it to be a really key and an attractive part of the portfolio. So there's a lot of other assets that we could do. If you look across our markets, we have markets where we're more than 50% of the revenue coming in digitally, still with relatively lower proportions of assets. And we have markets where it's 0, and then a lot of markets where it's in the kind of 10% to 20% range. And the driver of the 0 and 10% to 20% markets is primarily regulatory, and we are seeing movement on that around the country. So I do think that we're going to be able to continue to do the conversions. And then I think on top of it, we've gotten a lot better at monetizing the digital assets, and we're continuing to improve on how we do that. Both in things that we do direct to advertiser or direct through agencies where we're doing kind of big scale direct deals as well as the addition of programmatic to the mix. And I think that's something that is still very early. I'd even call the programmatic part of it nascent, better monetization is a little further along. So hopefully, that gives you a flavor. And then William, I'll hand it to you for Europe.

Yes. I mean, again, the key thing I think to note in Europe is the range of digital penetration that we have across the market. And that is largely driven by regulatory. In the U.K., we've been very successful in being able to get commission to convert to digital and in the last quarter of 2020, close to 70% of our revenues were coming from digital screens. In France, it's significantly lower than that because the constraint on putting digital on roadside is very significant. So the significant range of opportunity on digital at the moment, but I think that will change over the coming years, and I think we will be able to continue to grow. So from around 1/3 of our revenue across Europe at the moment, I see upside opportunity there. And again, using data analytics to help us demonstrate to advertisers the value of the investments that they make in our medium, this is also going to be a driver of change. And we launched our RADAR product in the U.K. and in Spain last year, and we'll continue with that rollout during 2021 and beyond. So again, I just see we've had very significant success in a number of markets, and I see that continuing and our investment continuing to deliver on digital over the next years.

And William, you've mentioned a couple of times, the data analytics, the RADAR service that you have now, can you just touch a little bit more and maybe Scott as well on what is that doing for advertisers? And how is that accelerating what you think is the adoption of those digital boards by various advertisers?

Right. Well, Scott has been leading the way in this, and Europe is a fast follower, I would say, what Scott and his team have been doing in the U.S. So why do we start with that, Scott?

Sure. I mean, I think the thing about RADAR and the data and analytics is, we are striving to provide a service that is akin to what advertisers have grown to expect from other digital media. It is produced using the same tools and the same techniques that mobile advertising campaigns use. And so our goal is to be able to plug into the programs and the ROI models and the tools that the advertisers are using on other digital campaigns. And we've had some good success with that. It might help to just give an example of a recent campaign, we got some press on that I can give a little bit more detail. We worked very closely with a brand, GameDay Vodka, around the Super Bowl, and what they used our toolkit to do were a few things: They used RADARView, which is our planning and visualization tool to target locations that over-index to the particular characteristics of their customers. And so there was a planning element to it. They also used the RADARConnect tool, which is when we sell mobile advertising in conjunction with the campaign to drive folks further to their website and things like that. And what they found from that and what they reported back to us is that 65% of their website traffic was driven off of these aspects of our campaign. So the billboards or the mobile media that we had and that their click-through rate was twice the sort of industry average that they had sort of modeled and planned for. And this is one example that we're able to give a fair bit of detail on but we have lots of examples of this, and I talk to advertisers all the time about out-of-home being the team player that makes the other team members play better. We have that amplifying effect and we have lots and lots of case studies that demonstrate that the out-of-home makes the digital work harder and vice versa. So it's something that we're definitely getting traction on with advertisers, and it does take a fair bit of work bringing people on board with the tools, but it's something that we definitely believe is key to the future of the business. William, I'll hand it back to you.

Yes. I mean, the same applies. And I think it all follows from a basic truth about advertising, which is there isn't a CMO in the world who isn't under pressure to demonstrate the return on his advertising or her advertising investment from their boards. And out-of-home has traditionally been one of the poorest in terms of having really robust data to demonstrate to advertisers that ROI. So the upside for us as we get more sophisticated and as we use the kind of data that Scott is talking about, the upside for us is really significant. Not just in demonstrating ROI, but actually in improving the efficiency of the campaigns that we run for advertisers. So that ability to better target and to put together packages of sites that deliver a particular target audience, that I think is part of the future growth that we will see. I mean, just to give another example, in Spain recently, where, as I said, we introduced RADAR. We recently ran a campaign for Disney+ for their mini series, WandaVision, where they wanted to target an 18- to 45-year-old demographic and a particular demographic who were interested in comics and video games. And we were able to, again -- through that anonymized, aggregated mobile data, we were able to put together a package of sites that overindexed on that audience. Now that's a very significant benefit because remembering what I was saying earlier, we are a mass-reach medium, so we're never going to and don't want to be a precise one-to-one targeted medium, we're a one-to-many medium. But if we can be more efficient in reaching a specific audience like that, then that's going to deliver greater value for our advertisers. And that seems to me to be a critical part of the future growth of the sector.

Okay. Great. Scott, I'm going to shift the focus over to you for a minute. In the Americas, you closed the book on 2020 with better-than-expected results that, once again, continued overall sequential improvement on a consolidated basis. So I know a little bit of a step back, as you talked about what you're seeing in the first quarter. Because conditions are so fluid now, we just had major pandemic announcements out of Texas and Mississippi. What is the latest you're seeing in terms of mobility trends around the country? What response are you getting from advertisers to those improving trends? And are they ready to act quickly, put money back to work?

Yes. I mean, the trend has actually been pretty strong for some time. I think what happened coming out of the blocks this year is that a lot of advertisers had it in their heads that they were going to hit the ground hard with out-of-home, at least, I can't speak for other media. They were going to hit the ground hard sort of March and beyond. February and January are always tough months in this business because of weather and things along those lines. And we had a really good January and February in 2020. And I think that compounded and led to us giving the guidance that we did for Q1. But the activity and the engagement has really been building since the fall, and we've really started seeing scale RFPs again. We definitely saw people planning for the year in ways that were consistent with prior years in a lot of cases. A number of our biggest advertisers were bigger with us in Q4 of '20 than they were in Q4 of '19. Obviously, that wasn't the case across the board because we do have a number of verticals that are very challenged, that are key customers like amusements and travel and restaurants, those kind of things. But we definitely are seeing people being confident. I think we're going to see that March will be a pretty good month. And I think as these announcements and, particularly, if you don't see at least in the Northeast, a lot of the press is sort of expecting and anticipating that there's going to be a new wave of COVID because these states are opening up around the country. I'm not going to opine one way or another on that. But I think as that plays out, that will have an impact as people think about it. But my sense is that advertisers are expecting consumers have a lot of pent-up money to spend and a lot of desire to get out and about. And I think we're going to see pretty good advertising dynamics as the weather warms up in the northern part of the country. And we continue to see vaccinations go up, all of those things. So I'm touching wood. I'm throwing salt over the shoulder, but I'm feeling like we're headed in a better direction.

No, that's encouraging. If we think about the hardest hit verticals: movies, travel, restaurants -- some of the restaurants. How would you frame the revenue opportunity that's still on the sidelines at the moment? And do you think that based on what your conversations are with those clients, that those revenues come back fully to pre-pandemic levels in the end? Or is that -- is there some element of permanent impairment there?

So I definitely don't think we're talking about permanent impairment. I mean, the one thing that's definitely true in advertising is the change is constant. And you have advertisers who have been hardcore TV advertisers walk away from TV, people who are hard-core out-of-home advertisers walk away from out-of-home for periods and then it cycles through. And I think we're going to see a lot of companies taking a really hard look as they add money back to their ad budgets and as they start to reinflate their P&Ls. I mean, some of these businesses have had no revenue for extended periods of time. I think it's going to take some time for these categories to come back kind of fully. But at the same time, I think that the reasons that they've liked out-of-home in the past are going to still be persistent, a lot of the things William was talking about in terms of our efficiency, the fact that we reach people who don't use social media. We reach people who don't watch TV. We reach people who've moved entirely to streaming, all those things work for us. And certainly, from the conversations we're having, the sense we have is that those categories are going to come back. I mean, some of them -- I mean, the thing that's striking, if we went through company-by-company in those verticals, the verticals are down, but they're actually not down as much as the revenue in the category is down. They've continued to support their brands in a number of cases, not universally, and it definitely varies in parts of the country with the Southeast and the South Central and Southwest being more robust than the coast, sort of the Midwest. So you have kind of -- it's not just the vertical impact, it's also the where the advertiser is. But I would expect we're going to see those categories come back as they start having money flow in their P&Ls again. And I think that we are certainly doing everything we can to emphasize to them the importance of out-of-home in their media mix and all the new tools that we've been talking about. I think, we're going to see that reflation start. And we actually have already started to see a couple of theatrical campaigns come in, which we really hadn't seen any theatrical since last March. So that's definitely encouraging.

Okay. Great. And Scott, I think you mentioned earlier, pandemic -- you mentioned earlier, programmatic playing a role now even though it's in a nascent stage. Is that bringing new advertisers to the table? And in the past, there's been worries about rate erosion with programmatic, are those concerns less warranted today?

So first of all, on the new advertisers, absolutely. We have seen a number of advertisers who were loyal outdoor advertisers in times past, but had left in the kind of teens, the 20 teens, because we didn't have good enough data and we didn't have the ability to step in and out of the marketplace in a fast way. We've seen a number of advertisers come back, which has been great to see as well as bringing people that are new to the category. So definitely seeing it enable folks. We do work with a pretty broad array of companies. We've got 4 SSP partners, and we have 30-plus DSPs. So we touch a lot of the digital-first advertisers that are out there through those various channels, which is great. In terms of the pricing erosion question, we have gotten very -- we've made a lot of strides in the sophistication of our toolset. And we do have a lot of flexibility in terms of setting floors when we do auctions, when we participate in that place -- in that part of the marketplace. And we have really not seen any evidence that we're seeing degradation. If anything, this is a premium product because it's letting people access these assets in a more flexible way than these assets have ever been able to be touched before. And it's definitely working out well for us.

Okay. That's helpful. Airports. I know you -- you spend a lot of your time with the Airport business. It accounted for, I believe, a low-teens percent of revenue in past years. Understandably, that's a lagging segment of the company as air travel has been depressed. But are you seeing any signs of life yet and as air travel ramps back up, can this segment map back quickly? And maybe you can also touch on your business wins in New York, where you're at in terms of the ramp-up? And what upside that could bring in the coming years as well?

Sure. So airports have been hit very hard. I think their impairment has been roughly in line with other transit categories -- kind of underground transit categories that you see, maybe not quite as bad. But -- and they definitely went in a little bit slower given some of the dynamics to them. I mean there are a couple of things to think about on answering your question. Airports have a real mix of assets in them. The way advertisers value particular assets matters a lot with how the airports laid out. So kind of each airport is its own unique thing, you have places where you have centralized security, you have other places where every terminal is separate with its own security. And so -- that has different characteristics to it. The premiumness of different locations, people -- the value of people coming into the market is different than the value of people leaving the market. And so advertisers think about all of those things. And then you add to it that the advertisers that are attracted to airports are more of a mix of B2B than probably average out-of-home. We have a lot of consumer brands too but the category over indexes to B2B. And so all those things are going to play roles in how we rebuild revenue in them and how we build momentum back. And certainly, people are watching very closely how travel rebounds. We saw a pretty strong rebound over the holidays. We saw a pretty good rebound over President's Day. We're seeing some rebounds around spring breaks around the country as that builds. And that's, I think, generally being attributed more to consumer travel and business travel. But one of the reasons why we've invested in analytics on the business traveler side is to help shed light on the high-value business travelers that are coming out, which they are traveling at this point. And so I think, first, you're going to have -- how does traffic ramp back up as vaccines proliferate and cases go down, which I have no ability to predict. But I think the other dynamic you're going to have is like other out-of-home, because there's this different level of premiumness of different locations and different use cases, you're going to see advertisers trying to lock in positions while we're willing to do attractive rates. And so the real art over the next, call it, 12 to 18 months is going to be striking the right balance of bringing people back to the category, but making sure that our pricing is escalating as the traffic escalates. And it's something that our team is familiar with this to a degree. It's never been as pronounced as it's been here. But certainly, we have people in the team who went through 9/11, certainly people in the team who went through the great financial crisis, we've got a sense of the playbook we need to run in order to keep the most attractive contracts short, attractive from the advertiser perspective. The most attractive ones on our side, we want to make as long as we can, obviously. But that's the balancing act we're going to do. And then you asked about New York. And on New York, we took it over at the end of last year. We have had good success in getting it branded and getting our logos up. We've started -- we've been hitting our internal sales targets on it. We've hit our internal hiring targets on it. It's progressing nicely. I think that it's attractive set of 4 airports, and they could be a meaningful part of our airports business as we rebuild. And I think it will be something, certainly from a network effect, having New York in our portfolio is going to help us as we work to sell other airports in the network. And I think we feel really good about the contract that we have in place. And it's -- look, it's going to take a while for airport traffic to rebuild and for airports to get back to being a big contributor, but we think it's an attractive part of the market, and it's part of the market we know how to operate in really effectively.

Okay. Perfect. I will let you take a breath, Scott. Let me focus my attention on William again for a moment and shift gears over to the European unit. It's been a bit more of a choppy path of late, given the second wave of COVID and associated travel and mobility restrictions. Just like in the U.S., where every day can bring changes, what's the latest you're seeing in terms of mobility across Europe, perhaps with a particular focus on your key markets, including the U.K., France and Spain?

Sure. Yes, I mean -- I've got very used now to reading mobility charts and reading infection rate charts and leading vaccine performance charts, which I seem to do on a daily basis, and we've all become amateur epidemiologists, I think. I think I'll just go back to saying the one thing that kind of keeps me saying, is the certainty that I have from what we saw in the third quarter of last year that when lockdowns are lifted, the advertisers return. And we feel that even in France, which has been one of the more difficult markets with COVID, we saw that with a very strong third quarter in France. But there's no doubt, as you say, that it's been tougher both in the -- towards the kind of end of the fourth quarter and into first quarter of this year as the second or third wave hit, as we saw new variants of the virus. And so to give you the picture as of today, I would say it's still pretty tough in France. To start with, the toughest of them all, I would say, is France, where they didn't go into full lockdown. They've had a curfew in place. They have not had the peaks in terms of infection rates that we saw in the U.K., but nor have they brought them down as significantly as we have in the U.K. over the last 4, 5 weeks. So there's been post 6:00 curfews, weekend curfews now imposed. Different departments in France are imposing tougher regulations now. And I don't have a lot of optimism that we're going to see much change in France within the next weeks. Spain had a tough time, but is definitely getting better, and restrictions are starting to lift a little bit in Spain. Sweden, not so good. They've had a very -- a varied response, I would say, to COVID, avoiding the kind of enforced lockdowns that we saw in some of the other major European countries. And I think we're now seeing more constraints being imposed in Sweden. And Italy, we're seeing infection rates go up. I don't know if you've been reading recently, but over the last week, the major cities: Milan and Rome, particularly, have seen pretty significant increases in infection rate and further lockdowns imposed. So in those markets, I would say, it's still bumpy. And I wouldn't want to predict. As Scott said, I don't have an ability to predict what's going to happen in those markets. In the U.K., I would say it's a brighter picture. We -- when we're not focused on what's happening to our Royal family and what Harry and Megan are saying to Oprah, we are very focused on the fact that today, our schools reopened in the U.K., which is a big moment in the kind of opening up of the restrictions that we've had. Government has laid out a very clear roadmap to opening up the country. They did that 2 weeks ago today. And since then, we have seen the pipeline building pretty well, and I am pretty optimistic that by April-May, we'll see the business showing some strong signs of recovery as those bookings come through. And as you know, the vaccine performance in the U.K. has been pretty impressive with over 40% of the adults in the country now having had at least 1 shot of the vaccine. So I think there are reasons to be optimistic in the U.K., which is the biggest market for us in Europe at the moment. And as I said earlier, a very strong digital market for us, which has the benefit that the advertisers can get back on those screens very quickly as confidence returns that people are out on the street. And I would just reiterate what Scott said earlier about spending power. The savings ratio has gone up significantly during the course of the pandemic. There was a lot of pent-up demand for hospitality and entertainment, and so as those restraints are lifted, I think, we feel very positive. It's just a question of when.

Okay. Brian, I have neglected you thus far in this call. So I want to bring my attention over to you for a moment and talk about the cost base. You did a lot of work on the cost side in 2020. Maybe you can highlight the savings you achieved, including the rent abatements? And how much of those reductions will cycle back as revenues recover? And how much of your savings actions you would consider permanent in nature?

Sure. And thank you for the question. I think of these kind of in 2 separate buckets: There's the bucket that includes everything from cost reductions that are just nature of the variable piece of the business. So business goes down, rent expense goes down because you're not looking as much revenue. But goes all the way through temporary furloughs and compensation reductions, reduction in discretionary expenses, pools of things that if we were to get back to the revenue levels that we did pre-COVID would start to come back. And we've disclosed in Q2, we had over $100 million of these type of savings: Q3, $60 million; Q4, $80 million. Now these are important. And particularly on the rent side, which is 60% of our cost base, you have to be very, very diligent to pursue all opportunities with the counterparties to get abatements or deferrals or whatever you can to reduce costs. But by and large, those amounts are likely to come back as the revenue comes back, as the business comes back. The other bucket of costs really are more permanent in nature. And these are the restructuring initiatives that the company has taken and talked about since the pandemic hit. And so these would involve permanent severance and other initiatives. And we talked about these restructurings -- restructuring initiatives in the Americas, which is largely complete and expected to save $7 million per year beginning in 2021. We've also had corporate restructuring that is expected to save $5 million on an annual run rate that is largely complete. We've completed our reduction -- our restructuring and cost reduction initiatives in Latin America, although it's kind of part of an international bucket, so we haven't disclosed those separately. But I do think it's worthwhile to call out that those are largely completed. Where we need a little more time is in the European segment. And that's largely a function of multiple countries, multiple jurisdictions. It's a little more complicated. But we do expect to have the restructuring completed in the back half of 2021 to 2022. And so we've done a lot of work both on what I would call, the temporary side. And that continues today to the extent that we have contracts that are still being impacted, negatively impacted by the pandemic. Our teams are hard at work continuing to get reasonable rent concessions. And we continue to work on the restructuring initiatives, particularly in Europe, where it's going to take some time to really bring those to fruition. But by and large, I'm proud of the team. We've done a lot of work. We'll continue to work on it, but we are focused on getting the rightsizing of the business in the current environment and we've had a lot of success.

Great. That was a great overview. Shifting over to the cap stack and your liquidity. Brian, you've done a lot of work in this area over the past kind of 12 months. Pushing out maturities, lowering your cost of debt, boosting your liquidity, remind us some of the actions you took over the past year? And what might be in-store over the next 1 to 2 years to help you further reduce your debt outstanding and improve your cash flow?

Sure. And I think there's 2 stories here. There's a story, and I'm going to go back a little bit further than a year. There's the story of -- for Channel Outdoor, upon separation. And we had a company that had strong operating performance but had substantial leverage, and we acknowledged that, and we came out pretty quickly after separation and started to address some of these issues. Leverage was a priority, reducing leverage was a priority. And during the summer, following separation, we issued equity. We refinanced nearly all of our indebtedness. We lowered rates, and we pushed out maturities. And a lot of that was the first step in trying to attack leverage, but hindsight -- but in hindsight, also helped us navigate through this pandemic. Now of course, when the pandemic hit and revenues dropped and free cash flow went negative, then we shifted priorities from reducing leverage to bolstering liquidity. And we had things such as the Clear Media sales, which brought in a substantial amount of cash that we put on our balance sheet. We issued some notes off of our European entities, the CCIBV Notes that brought in about $375 million of gross proceeds. Last month, we refinanced half of our unsecured debt stack. So approximately $1 billion of new Notes were issued and we called in about $940 million of our 2024 Notes. Again, pushing out maturities, reducing the coupon, benefiting from some cash interest savings on an annual basis. So have done a lot of work. At -- I think, at 12/31, we had about $800 million of liquidity, $785 million of that being in cash. So we think we've taken a lot of steps originally to try to reduce leverage, took those steps, but with the pandemic and focused on liquidity. And as we start to bridge to the other side of the pandemic, we'll once again turn our attention to the things we can do to delever. And that may help inform us on what the next 12 to 18 months looks like. And I think that over the next 12 to 18 months, we do expect to see business beginning to return to normal. As that happens, we expect revenues to come back, cash flows to improve. A lot of our costs are fixed. And so that negative operating leverage we've experienced since the pandemic will hopefully reverse, and we'll start seeing some positive operating leverage. The benefits from the restructuring plans that we've announced will start to kick in. We will have some pressure on working capital as accounts receivable and some of the rent deferrals that we've negotiated will start to come back into the mix. But by and large, our expectation would be if the recovery curve is positively sloping as we believe it is, and we start experiencing the benefits of having resilient outdoor assets in that environment, we'll have free cash flow. We'll begin to be able to deploy that free cash flow. And look, a lot of the levers that we had identified upon separation is being available to us to address leverage will start to matter again. We're focused on operating growth, but William and Scott have talked about things that we believe can help grow the outdoor business and our business, in particular, with the investments that we've made. I've talked a little bit about the cost savings. We've already seen some of the things that we've done in the capital markets and as things start to improve, we'll continue to be opportunistic and look to refinance at lower rates. M&A activity. As business improves, valuation gaps, we would anticipate that those start to close, and there may be opportunities in that area as well. So I think the first step is to position the company to benefit from a recovery, I think we've done that. I think we have sufficient liquidity to bridge to the other side. And then as we start to experience the benefits of the recovery and the return to a more normal business environment, we'll continue to kind of look at leverage and what we can do there. So that was a mouthful. I'll stop there, Aaron. I don't know if you have any follow-ups, but that's kind of the way I think we see it at a high level.

Yes. So Brian, if I can put my credit hat on here for a moment. You mentioned how leverage, at least for the time being, is a little bit elevated. What are the debt covenants that are in place right now that may be an issue or may not be an issue for you over the next year or 2 as the business recovers? Can you just touch on where those covenants are set? I believe you got an amendment for one of them, what the status of that is? Just bring us up to speed on that.

Thanks, Aaron. That's an important question. And one, we obviously pay very careful attention to. It's important to note that the company only has 1 financial covenant and that exists in its cash flow revolver, and it is a springing covenant. So it is only applicable to the extent we have a first dollar drawn under that facility or over $10 million of letters of credit outstanding. And it's important to note because it's in effect because we've drawn under the revolver. We put that cash on the balance sheet, and we need to be in compliance with that covenant. With the impact from the pandemic, we would not have been in compliance. And so we did think an amendment, and we're successful in obtaining one through Q2 of this year. So in Q3 of 2021 would be the first time that this springing covenant would be in effect. So the first thing I'd emphasize is, it is a springing covenant. So if we were to repay the revolver, and we repaid $20 million, I think, of the outstanding last quarter. If we repaid the remaining balance then the covenant wouldn't be applicable. So in that respect, it's somewhat within our control. Now obviously, if you take the cash and you repay the covenant and you're not in compliance, you're not in default, but you can't draw under it. So you -- that liquidity is not available, and you'd have to factor that in. But as I said, we feel pretty comfortable with our liquidity position. And if we need to, we feel pretty comfortable that we could pay down the revolver as necessary and turn off the spring, so to speak. I also feel that our bank group is -- we have a great relationship with our bank group. We were successful in getting an amendment. And if we chose to extend that amendment, we would have to go through the process of those things, and we really haven't had those conversations. But I feel confident that it would be a reasonable request for an extension of amendment, it's something that could be obtained. But whether or not we go that route or choose just to repay the revolver, I think, the most important thing I would want this audience to know is, it is a springing financial covenant and somewhat within our control because we can pay it on.

Okay. Great. Thanks, Brian. One last question because we are out of time, so many questions, so little time here. But William and Scott, on the M&A marketplace, what are you seeing across Europe and the U.S.? And what level of activity do you expect in 2021? Is the bid-ask spread on valuation still a little bit too wide as operators work to recover from the trough last year? And if so when do you think that bid-ask narrows as we move through the recovery?

Yes. Good question. I mean, the simple answer is, I don't think we know. I think at the moment, the bid-ask is too wide. I'm not seeing a lot of activity, not much activity at all in Europe, and I'm not seeing a great deal of activity in the U.S. So from our point of view, what we said a year ago in terms of our strategy and focusing on the U.S. market remains the case. But in terms of executing on that strategy, I certainly don't believe that we're seeing anything at the moment that indicates that the gap is narrowing significantly. So I would say you're going to be talking towards the end of this year before you see a significant change in that gap.

Okay. Great. Well, we are out of time. But William, Scott, Brian, I really appreciate your participation here under less than ideal circumstances, and I hope we can all be together in the same room soon. So thank you again for all your time.

Thanks, Aaron.

Thank you, Aaron.

Thank you very much, indeed. Thanks.