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

Thank you for joining us for this year's virtual edition of Deutsche Bank's Leveraged Finance Conference. I'm Aaron Watts. I cover the media, tech and business services sectors here at DB on the credit side. Pleased to welcome back Clear Channel Outdoor. From the company today, we have Scott Wells, CEO of the Americas; CFO, Brian Coleman; and Treasurer, Jason Menzel. Gentlemen, thank you for being here today. While we wish we were doing this in person, even though we're speaking virtually, the environment has certainly changed since our last fireside chat back in March at our equity conference.

To get us started, it would be great to hear your latest thoughts about the recovery that is taking place year-to-date, how you prepared Clear Channel for growth in the future while navigating some choppy waters. And Scott, the company announced William's transition from CEO to Executive Vice Chairman effective at the start of next year, with you taking the CEO reins. As you embark on that new role at a time where the way people live their lives and consume media is changing, the way clients buy advertising is also changing and the way clients' messages are being delivered to those consumers is in flux, what do you see in store for both Clear Channel and the industry in this next phase?

Great. Thanks for having us on today, Aaron. It's great to see you, and I'm sure we'll be together in person before too long. To your question, I'm very excited about the future of out-of-home. I don't think that there's a medium that can touch us. And increasingly, with the advent of our digital tools and our various analytic tools, advertisers are recognizing the real value of medium. It's the last mass reach medium, and I'm very optimistic about what's going to be possible in the future. If you think about the trends that we're working in our marketplace right before COVID, they really have been exacerbated by COVID. Those trends were that brands were overexposed to digital, which is where they all really got focused on during COVID for the obvious reasons. And then they were also seeing a lot of challenges with reach with linear TV, and we've seen those trends accelerated by COVID, and we're seeing as in the marketplace that advertisers are embracing out-of-home in a really big way. When I think about for us specifically, we've made huge strides in digitizing our business. And actually, COVID, in some ways, helped us in that because it forced us to accelerate a road map that we've been kind of working on for a few years in terms of getting electronic contracts, getting bar code and inventory handling, getting better tools to give visibility to our clients on proof of performance, all those sort of things. And we're right now in the state where we're able to start thinking in a much more sophisticated way about meeting our clients where they are and having the right cost model for that particular client, whether that's an automated pipe direct into a large agency or a much lower cost, simple way of self-service at smaller clients. We're not there yet on delivering self-service, but we are absolutely looking at developing tools to have unique experiences depending on exactly the circumstance where our client is [ actually ] coming from. And I think I'd be remiss if I didn't just reflect on the progress we've made with RADAR since we announced it about 5 years ago. This past quarter, you would have seen the announcement we had with Foursquare where we're actually able to do data optimization, data passback, which is a big milestone in out-of-home and a big milestone for us in particular. And as we get closer to being able to have that optimization tool set, it really completes what it's going to take for marketers to fully embrace out-of-home as part of the digital media landscape, which is super exciting and we've seen progress in programmatic. And we've known all along that marketers, while they tend to be experimenting all the time, they tend to take a while to embrace new techniques at scale. And I think we're in the opening phases of seeing that happen with out-of-home and programmatic out-of-home in particular. So lots to be excited about and we're very excited about the opportunity that lies ahead.

But let me shift gears and start with the ad environment. At the end of July, you reported 2Q results that beat expectations and, at the time, provided some upbeat commentary around the outlook for the back half of the year, including for second half revenues to land at 95% of 2019 levels. As we now find ourselves in the early days of October, any update to your previously provided third quarter revenue guidance? And how do trends look now both in the U.S. and Europe as we embark on the final 3 months of the year? And are you still seeing the -- continuing to see the month-to-month improvement despite the Delta variant factoring into the mix?

So we definitely have not seen or heard really globally any pushback about out-of-home or about ad sales relating to Delta. The media environment has dealt with it in a -- it has not been a big topic of conversation. And looking at consumer behavior, we're very encouraged by what we're seeing with consumers going back to sporting events, going back to concerts, going back to movies. Mobility had really picked up some time ago, but now we're actually seeing people gathering, lots of different protocols in place around needing to have vaccinations and whatnot. But we're very encouraged by that. And as we've said in the past and we observed last summer with Europe when the first mobility restrictions were lifted, the business bounces back once you see those. And we really have not got a lot of restrictions facing us. And we're quite encouraged that, particularly air travel, with international travel coming back this fall, it's going to just continue to move in the right direction.

And I don't know if I can press you on this again, but do you feel pretty confident in your third quarter guide, given that we're now -- I guess, the third quarter is technically a wrap?

Yes. I mean, we don't give refreshes to guidance. I appreciate your persistence. But the trends that we named, we feel good about.

Okay. Ad industry forecast or Magna updated its U.S. outlook last week and is now calling for out-of-home to grow just under 11% next year. Does that pass the smell test to you based on what you're currently seeing? And out-of-home pre-pandemic had been growing at or above GDP. Looking to the future, is that type of GDP-plus type growth or outperformance, I should say, sustainable?

So the second part of your question first, GDP-plus is definitely what we think is the right way to think about this business. Back -- well before COVID, it was probably '17, '18, people were talking about, maybe we weren't GDP-plus anymore and we really demonstrated in '18 and '19 that we were. And I think as we look at the recovery that, that should be something that we feel good about, the combination of the trends that I named earlier as well as our ongoing conversions to digital and ongoing acceptance of the medium with marketers. As for the Magna forecast, I can't comment on their specific projections. But we definitely see the industry growing robustly in 2022 and I think 11% would count as a robust number. So there's nothing that I'd say would be that, that's like a wildly inappropriate number. I just -- we're not at a point -- we don't have enough visibility to give you guidance on 2022.

Okay, got it. Scott, maybe let's peel away the layers a bit more on your legacy turf here in the Americas. Has the recovery evened out across the footprint? Have some of your markets that were lagging, particularly the larger ones, started to catch up?

The recovery is definitely broad based, and it's been very robust in many of our big markets. We definitely have some markets that are recovering a little less quickly. San Francisco, I think, has been a challenge. I think Chicago has been a challenge. But we've seen lots of strength in L.A. We've seen lots of strength in New York. And really, our Southern and Western assets, many of them didn't skip a beat during COVID and are kind of continuing to be strong. And we've definitely seen in the airport space with the return of travelers, the recurrent business at that space has been really good as well.

Yes. And this is a somewhat related question, but you saw local growth once again outpace national in the second quarter. Do you expect that relationship to flip at some point? Is it the bigger markets still holding back national or something else keeping larger brands on the sidelines at this point?

I think that national was most sensitive to COVID. And I think you're going to see that dynamic flip for sure, heading into the future that the categories broadly have come back where national are big drivers. There are individual -- you guys have been hearing, on people's earnings calls, the businesses that are getting hit by chip shortages and things like that, and that certainly impacts advertising and choices they make on that. But local has a higher mix of the height of the longer-term contracts, and their advertisers are just less responsive to the immediate environment. They tend to be more tied to the local community. And they perceive, and I think rightly so, that they still are getting benefits from their campaigns even at the disrupted times, which we're quite far from it at this point. So I would expect that our national business will be performing at a high level really going forward.

Okay. And on the vertical side, can you maybe call out a few of the verticals that are performing well, your top verticals that are performing well for you at the moment? I know movies seem to be having a little bit of a recovery in the last few weeks, and maybe some of the categories that you're still waiting for to catch up. I know auto, particularly with those supply chain issues that you mentioned a moment ago, might be a bit lagging.

Yes. I mean, it is -- as I mentioned before, it's a pretty broad-based recovery at this point. Business services was our largest vertical prior to COVID. It's still our -- it was our largest during COVID and it's still our largest and it's performing back to levels it was at before. The ones that had pulled back, theatrical amusements have come back strong. I think restaurants are still mixed. Retail is still mixed. There's definitely opportunity for both of them to come back more aggressively. And there are individual advertisers within that have gone through micro-cycles of their own, not necessarily related to COVID, maybe related to product launches and things like that. But when I look at the overall environment and you think about what we saw during the Memorial Day weekend with movie openings and the highly anticipated Bond opening, I think we're at a stage where consumers are back out in the marketplace and advertisers are looking to get their goods in front of them, which our medium is fantastic for doing.

Yes, okay. And a question on the Airports business. We had what I imagine should be a positive event for the business a few weeks ago with some of the restrictions being relaxed around international travel. What's the latest you're seeing from the Airports business? And have advertisers been responsive to some of the gains in travel volumes? And relatedly, how meaningful is it for these ad clients in the airports that the recovery is slower for business travel?

It's a great question. It's something we've been watching closely as best we can parse it apart because a lot of the stats on business travel are kind of backward-looking and you get them after things have played out. But if you think about the Airports business here, just pulling way back, it's a business that prior to COVID was running a little bit under 20% of our portfolio. I think that 17% is where it was, and it pulled back in 2020 to more like 14%. So you really saw the impact of the advertiser pullback. As we saw travel increase kind of starting in May and particularly picking up in June, advertisers definitely responded. And as the audience returned, the advertisers have returned. You got to keep thinking about airports as a real premium category of out-of-home. Whether you're reaching affluent people who are traveling, one of the things that data has really helped us with is demonstrating that many of those affluent people that you're thinking of reaching traveling are also business people. So even though maybe business travel is down somewhat, you're still getting a lot of bang for your buck with business leaders by having campaigns out and with the advent of digital data, we're able to demonstrate that to our advertisers. And so the dialogue with advertisers has been strong. We brought a bunch of advertisers back, people looking to claim parts of airports that they had pulled back that have come back to the category. And for business, I don't know that business is going to get all the way back to pre-COVID levels quickly. But I do know that business travel is definitely picking up. I mean, I travel every week. And the number of business people on planes has gone up substantially. We had a conference a couple of weeks ago in person out in Arizona, where there were a lot of businesses also having conferences. So business travel is happening. It's just not -- it's not as robust as it was prior, and advertisers recognize that pretty unique opportunity to people up at the airport.

Okay, got it. Scott, and maybe I'll pull Brian into the mix here, too, with this one. But as I think about your growing Airport business, it leads to my question here on margins. What's the right context for margins on the growing Airport business? And combining that with presumably 40%-plus margins on billboards over time, can you give us some goalposts around where margins should land for the U.S. business overall?

Do you want me to take a shot at that, Scott?

Yes, why don't you take the first pass and then I'll jump in. I've been talking a lot here.

All right, I'll give you a little break. Well, airport margins, Aaron, I don't think it's a big secret, are a lot closer to street furniture-type margins, so less than that 40% that you kind of think about when you think of our traditional business. So as the Airport business grows as part of our portfolio and in fact, with the addition of the New York airports, as an example I use, is the change in the business mix when we talk about margins, you can expect some impact. But I think if we go back to revenues at 2019 levels, we should strive for and we should be able to obtain margins that are in the same area. Yes, we'll have some headwinds from growth in kind of the nontraditional side of the business, which may carry lower margins. But through COVID, we've also taken out some costs in the business, and we need to be very vigilant about cost management. And to the extent that those costs don't need to come back to support our growth, we need to make sure that we keep them out of the mix. So I think as we get back to 2019 revenue levels in the U.S., we should expect to and we will strive to get back to those margin levels with the things we talked about all in the mix and under consideration.

And Brian, does a growing proportion of digital billboard revenues over time, is that a plus for margins overall or unchanged impact to margins or hurts?

Well, it's a plus. Our digital investment, whether it be in the convergence of sign or other things we think of as digital and technology, these are all investments we're making in the business to continue to grow revenue, so beyond 2019 levels to continue to grow revenue. And as we think about incremental dollars of revenue, operating leverage in the business and the pull-through, these are investments that we are hopeful and we expect to pay off over time. And so we shouldn't think of 2019 levels as a hard cap on revenues. The business was growing pre-COVID, I can see Scott moving his head, I'm sure he's excited to talk about all the things that we can see in the business as we go beyond 2019 revenue levels. Digital investment is definitely part of that.

Okay. I wanted to touch on the European unit for a moment. It would be helpful to hear the latest on the business environments across your key territories there and how your advertising partners in those territories have been reacting to the improving mobility trends.

I mean, I think it's very similar with what Scott talked about in the U.S., and maybe you have a little bit of a difference because you've got so many different markets that are represented by countries. We have geographies in the U.S., generally, they perform more in line maybe. You do have countries that could be outliers. But that all being said, I think the theme that I want folks to take away from this conference is the recovery is well underway in Europe just as it is in the U.S. The mobility trends continue to be favorable because of the restrictions that we saw early in COVID haven't come back, and that bodes well for our business. Overall, our business is about 2/3 roadsides throughout Europe. We are particularly roadside-intensive in markets like the U.K. and those markets have led the recovery. There'll be other markets such as Scandinavia, where we do have some limited transit exposure. And those markets have been slower to recovery, but slower, not recovering. Everything points to recovery. It's well underway. And when we think about our Q3 guidance that we provided, it reflects that recovery. And although we didn't provide Q4 guidance by segment, we did increase our Q4 guidance for the consolidated entity. And Europe is part of that and contributing to that just like the U.S. So I think we're very excited about Europe. The recovery is well underway. There's disparity between countries but it's really in the pace of recovery, not that anyone is struggling to recover.

Okay. And this is a bit broad stroke over Europe as a whole, but we did see a round of consolidation activity in late 2018. Have you noticed any shift in competitive environment because of that consolidation activity? Are you seeing rational behavior for bids for new projects or bids that come up for a proposal?

I would probably start in with I don't see major shifts. I think during COVID, municipalities pulled back on contracts. Certainly, participants looked a lot harder. We introduced some protective language in certain contracts where we felt it was necessary, kind of like a COVID return protection. Sometimes you'll see protections built in, in terms of traffic or if places are closed for business. So there may be some changes. But in terms of competitiveness, it's a very competitive business in Europe. All these contracts go up for bid. There has been some consolidation. There have been some new entrants into certain markets, kind of your local competition. But again, I think from a structural side of the business, nothing has really changed. It's always been highly competitive and it continues to be so.

And that actually was going to be my next question. Has there been any structural changes in the contracts in Europe as a result of the pandemic or competitive bidding that could put pressure on margins going forward that maybe weren't there before? Or you're seeing a lot of the same terms being discussed as you might have pre-pandemic?

Look, I think it's competitive. I don't see any major structural changes in the nature of the competition. Sometimes, contracts are just worth more to certain bidders. We talked about that when we aggressively bid and won the Paris contract. And we've seen that in certain contracts that we've lost. And it's easy for us to say or one of our competitors to say, "Oh, they won that because they were irrational in their bidding." Well, certainly, we say it and we think it is compared to what we would be willing to bid, but then I flip that around, and you can hear competitors say that about us. But it fit better in our portfolio or enhanced our portfolio more so it made sense. So I don't think anything really structural changed -- structurally has changed. I did mention that in certain contracts, you've built in some protective language. I mean, we went through something that we really hadn't seen before. And as a result, I think you always want to try to introduce that into contracts, if you can. In some cases, that's possible. Like if you have a contract in a mall and the mall shuts down for business and they've got no passenger traffic, that may be something where you can introduce some new language. I don't know how sweeping that will be. I don't know how long that will last. But it's certainly something we think of as we enter into new contracts. Now not a lot of contracts always came up during COVID. A lot of them were pulled back. And now we're seeing an uptick in that. And I think we'll find out kind of on the other side of this uptick if some of that language becomes a permanent part of negotiations or it's just kind of your COVID language that you were able to obtain during this point in time.

Okay. And Brian, you mentioned earlier about -- on the cost side that you've done a lot of work, and I don't want to shortchange that because there was a lot of wood to chop and you did it over the past 18 months. I think in the second quarter alone, you achieved $35 million of rent abatements. Remind us the cumulative savings you've been able to achieve relative to the 2019 cost base, where they came from, and as you see the business recover, how much of those reductions will be permanent in nature? And how many -- how much of them cycle back in?

Yes. I think the way to think about it is we have had, I don't know the number Eileen made, but it's at least, I think, like $75 million this year, maybe in total, even more than that. A lot of that had to do with rent abatements. These will go away as the business improves. We will continue to try to negotiate for those and we're likely to see some in -- throughout the remainder of the year, maybe even a little bit trickle into the following year because there's a bit of a lag. But those really relate to extraordinary events that happened during the pandemic and reduced the ability to generate revenue under existing contracts. Another area that we did -- the team did a great job is managing our compensation base. That, you should also expect to come back as the business grows and you would want it to, right? Whether it's somebody that's out there putting on signs or cleaning a freestanding unit in downtown London, these are things we want to continue to do as the business comes back and we can benefit from the recovery. I think when we think about the permanent cost savings, it's probably easy to look at -- or easier to look at the restructuring initiatives. We did a restructuring in the U.S. to save $7 million per year on an annualized basis. We cut back corporate costs, $5 million per year on an annualized basis. And we entered into a longer-tail European restructuring process that's expected to generate $23 million of annualized savings. U.S. and the corporate are largely done. Europe will take a little while just because of the process you have to go through to actually crystallize some of these savings. We do expect to see some of those in 2022. It likely won't be completed until early 2023. Those are more permanent in nature. That's cost we've taken out of the structure of the business. And when I talk about costs like rent abatements that will come back with the business, these are costs that should not necessarily come back. Now some of them may, you may have new ones. But these are the ones that we're going to stay focused on and make sure that they don't come back unless it really supports incremental growth in the business.

Okay. It sounds like if I set aside your new business wins with the airports, which, as you mentioned earlier, come with lower margins, there is opportunity in the future that you should be at either stable margins with pre-pandemic levels or even able to exceed those. Is that a fair comment?

I think it is fair and it's certainly our goal. What I try to do other than to lock ourselves into we hit [ '29 ] revenues, we'll be at [ 29% ] margins, is kind of explain kind of what's behind that. And so our goal is if we get 2019 revenues, and by the way, there's no reason to expect that we would stop there, we should continue to go through that, but the attractiveness of the business that existed pre-COVID exists today. The investments that we've made in the digital and the technology side of the business that we think will help us grow revenues, it's all being done. We haven't pulled back on those. So as we approach 2019 levels and the incremental revenue dollars after that, we would expect incremental margin contribution from those new initiatives. But at 2019 levels, the headwinds are the change in the business mix, potential for inflationary costs and the tailwinds are the costs we took out of the business that we'll continue to focus on and keep out of the business. But I don't want to overly emphasize that. I think our goal is to continue to grow revenue and get the incremental drop in margin and EBITDA that comes from that incremental dollar of revenue.

Sure. Seeing as we are virtually at a credit conference, I want to ask you a few questions about the cap stack and your liquidity position. On the second quarter call, you raised your guidance for end-of-year cash balance by $50 million. What factors are driving that improved liquidity position? And talk about your comfort level with liquidity moving into 2022 as you move towards generating normalized positive free cash flow. And I don't know if you're willing to say this, but do you expect to be free cash flow positive in 2022?

Okay, I'll save that last question for last because it will have to be some kind of indirect answer, but I'll touch upon it. But I want to start with liquidity. First, we feel very comfortable about our liquidity position. Jason and his team in working with the businesses have done a good job of finding drops of liquidity, making them available. The businesses have done a great job of preserving liquidity, everywhere where they can, whether it be cost cutting or CapEx deferments, whatever the case may be. So the company has really come together and done a great job of managing liquidity. We were able to increase our liquidity forecast really because of 2 reasons: one, as you can probably tell from what Scott and I had said earlier on the call, is it's the recovery. The business is coming back and in certain parts of the business, even faster than we expected. And so we're very pleased with that. And with our revenue increases -- increased guidance that we provided on our last earnings call, it only makes sense that we were able to increase liquidity as well. Also contributing to that was a state-subsidized loan that we're able to obtain in Europe that contributed to that increase as well that increased liquidity. And this was -- it's a form of relief. It wasn't a rent abatement, it wasn't a government payment that you received. It was like a low interest rate loan that was provided in this market. And so it was another form of relief. And when you can get a near 0 interest cost loan, I think you typically take it. There's no prepayment penalty so we can always it pay back if we wanted to. So those were the contributors to liquidity. Look, I think we provided that top line revenue guidance for end of the year that we'd be close to 95% of 2019 revenue levels. If that continues and we get back to 2019 and go through 2019 levels, if we're 95% at the end of the year, it's reasonable that could occur in 2022. We've talked about what our margins look like if that were to occur. So it doesn't take a big leap of faith to say if those things continue, if the recovery continues, then we could be back to free cash flow positive in 2022. Sure. Now those are some ifs. But I think we're definitely headed in the right direction.

Okay. And you've also worked hard on improving sort of your debt structure and so much is pushing out maturities, lowering your cost of debt. Remind us a couple of the actions you've taken and what might be in store over the next 12 to 18 months to help you further reduce your debt outstanding and further improve your free cash flow position.

Well, we've done a lot in the first 2 years of history since separation. And in fact, it started pre-separation when we refinanced the subordinated notes, so kind of the lowest piece of debt capital in our structure. Following separation, we went out and we did a multi-pronged approach to the cap stack and started with issuing equity, improving our debt ratings, enabling us to refinance basically the rest of the capital structure, the majority of it, push out maturities, lower the cost of financing. Most recently, we've refinanced the -- what were the sub notes, now they're the kind of the unsecured notes, but pushed those out, creating a liquidity runway with respect to material maturities that really provide the business time to recover, time to get back to free cash flow -- positive free cash flow generation. So we feel good about the maturity runway. We feel good about where we've lowered our cost of debt. We've also done some things such as the sale of Clear Media that brought some liquidity on the balance sheet. And right before COVID hit, we've talked about being open and taking a look at opportunities to kind of rationalize, where appropriate, our businesses, focusing on the businesses that generate the highest margins and the best returns, which -- a lot of that's in the U.S. So again, I think we feel pretty good about what we've done with respect to lowering our cost of debt. I think we feel really good about our having pushed the maturity runway out -- profile out and creating a runway for the business to recover. I think we feel good about the direction of the business and our ability to generate positive free cash flow. We have plenty of liquidity to bridge us to that point in time. So again, I think with the underlying recovery in operations, we feel pretty good that we're set up to capitalize that -- capitalize that -- capitalize upon that, so to speak.

Okay. And your equity has performed well. Could that play a role in the deleveraging process in the future?

There are no plans to issue equity. I think the way to think about deleveraging is first, let's see the recovery of the business. Let's see what the top line growth profile looks like. Let's see where we are with respect to free cash flow generation. Let's also take a look at what happens on the M&A front. As the businesses recover, valuation gaps are continuing to close. We're starting to see some activity in the U.S. and Europe. The tone of discussions in the M&A marketplace has improved. And so I really think before you think about where do we need to be at the end of the game with respect to leverage, let's kind of see what happens over the next, I think you said, 12 to 18 months. I think that's an interesting window. Let's see what happens. But there are no plans to do anything with respect to equity as a deleveraging currency at this point in time.

Okay. As I think of the other components of moving from the EBITDA you generate down to free cash flow, I wanted to touch on 2 of those facets. One, a quick one maybe just how to think about cash taxes for next year. And then secondly, CapEx. And you've seen some up and downs in CapEx the last couple of years, understandably. Can you maybe talk about how to think about CapEx next year as well with the backdrop of -- I'm sure you want to be investing in additional digital boards and you talked about some of the other digital investments that you're making, whether it's around RADAR and those types of investments? So just cash taxes and CapEx, if you can give us some color there.

Sure. Taxes is never the easiest topic to discuss, but in this case, it may actually be easier because you gave me a kind of a year horizon. So I think what we've seen in historically kind of pre-COVID isn't going to be too dissimilar to what we see going forward. And I'll break it down like this. There are going to be taxes, foreign taxes, some state and local taxes. These things, you're just going to have. But the business is being in a position of being a federal taxpayer in the U.S. We're really not in that position. We made an election, a 163(j) election, that enables us to deduct the interest expense that relates to our real estate business, which is largely our U.S. business. We have a lot of debt and we have a lot of interest expense. And so one of the benefits is, from a tax perspective, you'll be able to deduct the proportionate interest related to that. And that should shelter us, so to speak, from federal taxes for the near future. Interestingly enough, if you were to divest some of your kind of non-real estate business or your international business, the proportion of interest you're able to deduct increases. So that, depending on what happens on the portfolio optimization side, that actually could have some tax benefits over the long run. But I think from a tax position, you should think about it as pre-COVID levels are likely to continue for the next year or 2 because of the position that we've been able to put ourselves in. CapEx is a little more dynamic. If you think about where we were in 2020, I think we've given guidance of about $200 million to $210 million. Now that may be a little lower than prior years, but keep in mind, prior years included China. I think $200 million to $210 million was a good kind of base pre-COVID CapEx level for the consolidated business. Now we didn't -- we never spent that much because COVID did hit. But when you're looking at a baseline, I think that's a good one to think about. In 2021, we've talked about CapEx being in the $165 million to $175 million range. And I think with the recovery in the business, we're likely to approach the higher end of the range. It's just the opportunities are there, and we want to we want to make sure we'll get those opportunities. And then I think in 2022, if the recovery continues as it has, you can expect us to get back to those normalized levels of $200-plus million for the consolidated business. The one caveat I would provide is this is money that we set aside and just spend, the opportunities have to be there. The businesses have to make the case. You might have something like L.A. come back online or something like the New York airports or something that could push you to the higher end. Or you may just not have those opportunities and you wouldn't get to the higher end. But I think in terms of what is a normalized level, that $200 million to $210 million range from 2022 and beyond, given what we can see today, is reasonable. We won't get there this year but we'll likely be around kind of the guidance we gave. And look, if we go above it, that's because those opportunities were there when we wanted to invest in them. So that's my view on taxes and CapEx. Hopefully, that's responsive.

No, that's great. Wanted to ask about the M&A pipeline. William has spoken about M&A activity beginning to pick up as the recovery takes hold. And you've made it clear it's your intention to focus on your higher-margin businesses in the future. What are you seeing in terms of the pipeline today, both here and in Europe? And what opens the door wider for increased deal-making?

So I think I'll take a first run off this, and then Brian, you can chime in if I miss anything. The door is actually opening pretty robustly here in the States. We've seen a couple of transactions, Stott with Lamar out in California and then the Adams transaction that was just announced a couple of weeks ago. We don't have a ton of details on what those look like, but I think they're indicative of what we're seeing at the smaller end of the market here in the U.S. of the door being open. Many of the smaller operators didn't get hit terribly hard by COVID, depending on where they were, just like we talked about on our earnings call where we've had some of our smaller markets go through COVID and not miss a beat. I think that's the dynamic that a lot of these smaller operators have had. And so I think the door is open in that regard. I think opening it wider and looking over into Europe, where I think the downturn was probably more broad-based and a little bit longer, it had a little bit of a different rhythm than it had here in the States. You've seen the recovery start to take hold in our most recent filings. You've heard us talk about the trends that suggest that things are moving forward. I think the key thing is going to be getting potential buyers confident in the trajectory. And I think in the U.S., we're maybe just a little bit further ahead than where we are across the world as a whole. But I think that the dynamic is playing out, and we're certainly thinking very much like Brian referred to about optimizing our portfolio. Brian, I don't know if you'd add anything to that.

I think that hit it right on the head, Scott. Nothing to add.

Scott, a lot -- you and your peers were all hit by what went on with the pandemic. Does that open the door for private equity money to come into the space? Or with some of this activity you're seeing and expect to see, do you think it's still going to be about strategics being the buyers, whether it's here or in Europe?

There's definitely private equity interest in this space, no question. We certainly have heard about numerous private equity -- I mean, the Adams investment involved private equity money, so there's an object example of it and we've definitely heard about people being active in the space. It's like in any industry, the strategics have certain advantages and the financial buyers have certain advantages. And given where the market is at the moment in time, that may look a little different. But I fully expect that private equity is going to be active in this marketplace.

Okay. And Brian, you spoke about the liquidity earlier with me. Is Clear Channel in a position to take advantage of some opportunities that may arise, particularly here in the U.S.? And on the other side of that coin, to the extent that you are looking at trimming the portfolio, can you remind us what your tax basis looks like post separation, both here in the U.S. and Europe and in Lat Am?

Well, look, it's kind of our job to always be in a position to be able to take advantage of opportunities should they present themselves. Now we were separated, highly leveraged and we remain highly leveraged, and so we may have to be a little more creative if these opportunities are big. But in terms of -- if you think of the whole landscape, we're already taking advantage of these opportunities. It may be a Board, it may be a couple of Boards, it may be an asset swap. But when I talked about hitting the higher side of our CapEx budget, it's reflective of these opportunities and us being able to take advantage of them. And look, we'll work with our banking partners. We'll figure out ways if there are bigger opportunities that we want to try to find a way to participate in. I think on the -- I guess, the second part of your question had to do with the tax basis. I don't think we've really talked a lot about what our tax basis is in our different jurisdictions, so I don't want to introduce that on this call. But what I would say is we've got a good tax team. They're pretty thoughtful. And we understand that priorities for any type of investment would be optimizing your net cash proceeds from those investments, and that will include the tax attributes that are associated with them. And I'll tell you, even if I had a tax basis number, it'd be by country or it would be for all of Europe. And without knowing what a structure of a potential transaction would look like, it wouldn't be all that meaningful at this point in time anyway. So maybe as time goes by, we'll be a little more -- we'll have a little more to disclose on things that would be helpful. But now even if we had something, I'm not sure how helpful it would be. So I'll leave it at that on this call.

All right. I'll bring it up next time we chat. So we're about out of time. Scott, any closing thoughts for the audience before we wrap it up today?

I mean, I'd just begin where I ended that we're very excited about the opportunity in front of us. We think that there's a lot of trends in the marketplace that are working in a good direction. And we think that we're well positioned to capture some opportunity here. So excited to be with you today and appreciate the opportunity to talk with you. Thanks, Aaron.

Yes, thanks so much for the time.

Thank you, Aaron.