Here’s a selection of Scott Well’s comments at last week’s Citi 2023 Communications, Media and Entertainment Conference
Asset Sales
In 2019 when we separated we made a point that we were going to focus on the US. In 2021 we made an announcement that we were going to divest our European assets. We chose to move our whole platform and that process was moving along nicely until the Ukraine war broke out. It became considerably harder to look at a whole platform deal…so we pivoted to look at individual market divestitures and shortly before the end of last year we announced the first of those…We signed a deal to divest Switzerland for about $92 million which is about 9.5 times their EBIDTA contribution. It’s a deal which we think is the first of a few more to come…We have active dialogues going in multiple other countries.
Brands who pulled back during covid made a mistake.
We had a lot of marketers that did pullout during covid and then tried to come back. And what they discovered is that…(a) they couldn’t get the signs that they had before covid because somebody else had bought them, and (b) if they did get the signs they had to pay quite a bit more…A number of marketers have shared with us how their brand statistics suffered as a result of pulling back from out of home…they are very committed customers…because they had an object lesson in what happens when they pull back.
Recessions
…If you look back at recessions, if you look back at the early 80’s, if you look back at 90-91, if you look back at 2001-2002, out of home typically pauses during downturns. It doesn’t typically regress a lot…we tend to have a decent part of our business on long term contracts and we tend to be part of campaigns that advertisers don’t necessarily cut first. They tend to be baseline stuff. That’s somewhat different now…because with the advent of so much digital – we’re almost 40% digital sign – those tend to have shorter contracts and are more volatile…Programmatic will be volatile, digital will be volatile but the longer term campaigns tend to be stickier…
Wells regrets the Clear Channel 2015 sale
The last thing I want to do is sell more US businesses. We went through that with iHeart in 2015. You saw how effective we were at raising liquidity in a very short period of time with a clearly distressed parent. It’s a shame that that got used the way it got used but that wasn’t my call and it didn’t end up helping us…if we’d held onto those assets we’d probably be generating an additional $80 million in EBIDTA for us today and that would be awfully helpful. That would be like another turn of debt almost…
On reducing debt
Debt reduction is unquestionable the biggest value driver that we’ve got…As an entity the US creates a lot of cash. That cash just gets taken to pay interest…We can’t have our debt be where its at and be a REIT…Ideally you’d like to be down in the 4 zipcode..you could probably be as high as a 6…but you’d be borrowing money to pay the dividend in some years…so we’ve got to get a couple turns down…
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