Clear Channel Outdoor CEO Scott Wells was bullish on out of home at yesterday’s 50th Cowen Tech, Media and Telecom conference.
The big picture
The last two weeks we’ve had our US Outdoor conference and the global outdoor conference…the vibe at all of those is really positive. The industry has embraced data and analytics. The industry understands that it needs to create more an accountable experience for the advertisers and what you heard speaker after speaker talk about was how effectively outdoor is competing with digital media and television.
One of the few out of home verticals which is down
Auto insurance is in a ditch right now from an ad spending perspective…They had an amazing time during covid and then when covid started to wane a lot more accidents started happening and it got a lot more expensive to fix cars. So the auto insurance industry is in the middle of rerating themselves everywhere and until they get re-rated they’re not going to spend money on marketing because they don’t want more claims.
The impact of inflation
Both in the US and Europe half of more of our costs are our site lease and in the US those costs are quite fixed. Most of them are long term contracts that get renegotiated 3-7 year cycles…Inflation…is a friend of the business because your costs are fixed but you’re able to increase rates…20’ish is our personnel…We will be increasing our personnel costs…
Iconic inventory is hot
There is a big push right now for iconic inventory. It’s a small part of our inventory base but it’s an incredibly powerful part of it and when people came off of perms they saw those perms bet quite a bit more expensive.
How digital changes the recession performance of out of home.
What you saw in prior downturns was out of home was last to go in and last to come out. I think you’ll see us go in faster if in fact it’s a widespread downturn and out of home budgets are getting cut along with everyone else’s budget…but then you’ll see us do what we did coming out of covid. We roared out of covid…
M&A
It is a good M&A environment right now…But we’re not going to go do heavy M&A until we get the European question sorted.
Leverage Targets
We don’t have a long term target that we’ve announced but I think that we have talked at some length that to be a REIT we would need to be down in that 5-6 range.
Billboard Insider’s take: Wells and Clear Channel Outdoor CFO Brian Coleman have been talking about REIT’s on recent earnings calls and investor appearances. Billboard Insider expects Clear Channel to convert to a REIT once Europe is sold and leverage declines to 5-6 times cashflow. REIT’s are dividend machines and it makes no sense for Clear Channel to be a REIT at the current 9 times Debt/Cashflow because debt service is so high there’s no room for dividends.
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