Results of Operations and Financial Condition
Clear Channel Outdoor Holdings, Inc. (the “Company”) expects cash and cash equivalents to be approximately $650 million as of June 30, 2020. This amount includes the proceeds from the sale of Clear Media Limited.
This expected cash balance, combined with the amendment to the Company’s credit agreement announced in June and the Company’s successful cost savings initiatives, support the Company’s efforts to manage through the current macroeconomic environment.
Impact of the COVID-19 Pandemic
On March 11, 2020, the COVID-19 outbreak was characterized as a pandemic by the World Health Organization. In an effort to slow the pandemic, governments around the world placed significant restrictions on travel and closed businesses, resulting in unprecedented nationwide lock-downs. Our business, along with the global economy, has been adversely affected by these developments, which have resulted in a significant reduction in time spent out of the home by consumers, reductions in consumer spending, large declines in GDP, volatile economic conditions, and business disruptions across markets globally. The full magnitude and duration of the pandemic and the resulting downturn and their impact on our business is difficult to predict.
To better ensure the health, safety and wellbeing of our employees and their families during this extraordinary time, we initially transitioned a significant portion of our employees to work from home in Italy in early March, and expanded this directive globally by the end of March. We believe these teams were able to make the shift to a remote work environment relatively seamlessly. Our advertising inventory has been used to facilitate messages of support to medical teams, first responders, delivery professionals, food service workers, and many other key workers in all parts of the world. In addition, we have provided support to governments in helping remind citizens to observe restrictions and how to stay safe.
Markets in Europe have experienced dramatic declines in customer demand as a result of COVID-19. The downward impact across some European markets started to be felt in early March, corresponding with governments issuing advice on lockdowns in markets such as Italy, France and Spain. That downward impact continued across all European markets for the majority of the second quarter. In France, our largest market, the lockdown was announced mid-March and resulted in a sharp downturn in advertising spend at the end of the first quarter. In the U.K., our second largest market, the country entered full lockdown in the last week of March.
As a result, since March, there has been a significant decline in our customers’ near-term demand as they have deferred buying decisions and reduced marketing spend. The impact of COVID-19 and the protocols
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implemented around the world significantly affected the behavior and movement of consumers and our customers’ target audiences. Transit was the hardest hit with many people avoiding public transport for health and safety reasons. The scale and speed with which near-term demand declined, and the number of requests we received to defer or cancel contracts, has been unprecedented. We have taken, and will continue to take, steps to ensure the continuity of our platform and operations to serve our customers as local conditions permit.
In May, as new daily cases continued to fall in Europe, European countries started to gradually reopen their businesses and lift restrictions, helping mobility recover toward pre-COVID-19 levels. Following the continued return to normalized traffic levels, we are experiencing not only an uptick in bookings but also a shift in behavior from our customers, with lead time from booking to display now shorter than normal. With our high proportion of roadside advertising, we believe we are well positioned to capture the recovery in walking and driving and the resulting audience exposure to our assets.
It is unclear when an economic recovery could start and what a recovery will look like as countries emerge from this unprecedented shutdown of the global economy. In light of the rapidly-evolving impact of the COVID-19 pandemic, the magnitude and duration of its impact on our results of operations and overall financial performance will not be known until future periods. We anticipate significant adverse effects throughout our business during the remainder of the year. This is largely due to customers deferring buying decisions and reducing marketing spend.
We have taken a highly disciplined approach in managing the use of our cash through this period. We have implemented extensive cost saving initiatives, including reductions in operating costs and capital expenditures. We have taken steps that we believe will most effectively support our advertising partners to take quick advantage of renewed opportunities for connection with their customers as the pandemic restrictions begin to relax. Sales teams have been in active discussions with customers to develop advertising plans as restrictions are lifted. Importantly, we believe technology investments made before the pandemic, specifically in expanding our digital footprint, will serve to position our businesses to meet our customer’s needs. We believe that the depth of our digital inventory provides the flexibility to quickly accelerate advertising campaigns and most effectively target audiences at the right time for our advertisers. However, a second wave of the virus may result in changes or delays in our customers’ advertising plans, causing further adverse effects on our results.
Recent Developments
Our unaudited interim financial statements for the three months ended June 30, 2020 are unavailable at this time because our financial closing procedures are not yet complete. However, our results will be adversely impacted by the COVID-19 pandemic.
Our preliminary estimated range of revenue for the three months ended June 30, 2020 is expected to be between $100 million and $115 million. In addition, we expect our Adjusted EBITDA for the three months ended June 30, 2020 to be substantially negative and we do not expect to achieve positive Adjusted EBITDA for the year ended December 31, 2020.
