Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) Q1 2024 Earnings Conference Call May 9, 2024 8:30 AM ET
Company Participants
Eileen McLaughlin – Investor Relations
Scott Wells – Chief Executive Officer
David Sailer – Chief Financial Officer
Justin Cochrane – Chief Executive Officer, Clear Channel UK and Europe
Conference Call Participants
Cameron McVeigh – Morgan Stanley
Daniel Osley – Wells Fargo
Avi Steiner – JPMorgan
Lance Vitanza – TD Cowen
Aaron Watts – Deutsche Bank
Jim Goss – Barrington Research
Eileen McLaughlin
Good morning and thank you for joining our call. On the call today are Scott Wells, our CEO and David Sailer, our CFO. They will provide an overview of the 2024 first quarter operating performance of Clear Channel Outdoor Holdings, Inc., and Clear Channel International B.V. We recommend you download the earnings presentation located in the financial section in our Investor website and review the presentation during this call. After an introduction and a review of our results, we’ll open the line for questions, and Justin Cochrane, CEO of Clear Channel U.K. and Europe, will join Scott and Dave during the Q&A portion of the call.
Before we begin, I’d like to remind everyone that during this call, we may make forward-looking statements regarding the company, including statements about its future financial performance and its strategic goals. All forward-looking statements involve risks and uncertainties, and there can be no assurance that management’s expectations, beliefs or projections will be achieved or that actual results will not differ from expectations. Please review the statements of risk contained in our earnings press release and our filings with the SEC.
During today’s call, we will also refer to certain measures that do not conform to generally accepted accounting principles. We provide schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of the earnings presentation. Also, please note that the information provided on this call speaks only to management’s views as of today, May 9, 2024, and may no longer be accurate at the time of a replay.
Please turn to Slide #4 in the earnings presentation, and I will now turn the call over to Scott.
Scott Wells
Good morning everyone, and thank you for taking the time to join us today. We delivered consolidated revenue of $478 million for the first quarter, excluding movements in foreign exchange rates, reflecting a 9.3% increase as compared to the prior year. Many of the trends we saw in the fourth quarter continued into the first quarter. These results, which were in line with our guidance, reflect record first quarter revenue for America, Airports and Europe-North excluding sold markets and movements in foreign exchange rates. We remain focused on delivering on our strategic plan, which is aimed at enhancing the profitability of our business, focusing on our higher margin U.S. assets, and integrating the right technology into our platform to strengthen our ability to serve a broader range of advertisers.
In our America segment, during the first quarter, digital continued to grow and print bounced back nicely, driven in large part by growth in our local sales channel, including secondary locations, which helped margins. Performance was broad-based across the majority of our markets. Verticals that delivered the most growth include business services, amusements and media entertainment. We continue to develop ways we can proactively bring new national brands into the sector against a backdrop of mixed inbound demand. Our national sales team continues to generate incremental revenue in both pharma and CPG. And programmatic is performing very well, delivering a double-digit increase in the first quarter, with very strong growth in the current quarter.
Supporting our efforts, we’re continuing to enhance our sales teams including attracting sales professionals directly from the key verticals we’re targeting. We believe this will have a positive impact and drive incremental revenue. Overall, we believe we’re effectively playing offense in pursuing business across a number of channels. For example, our RADAR data solutions continue to bring innovation into the out-of-home marketplace, opening doors to new advertisers and verticals, by providing previously unavailable insights to customers on how their out-of-home campaigns are performing.
We are piloting a new approach where customers are starting to get weekly updates on campaign performance, initially around how Clear Channel’s media is driving visits into restaurants and stores that advertise in our markets. Regular delivery of campaign performance data is a critical step in moving us closer to the experience that advertisers expect from digital media.
We also continue to innovate around out-of-home’s impact on mobile app behaviors and how our media drives measurable performance. For example, we completed a study in Q1 for a mobile audio entertainment platform that demonstrated that consumers exposed to one brand’s ads in our airports were more likely to try the app and were more deeply engaged with the app’s content. It’s encouraging progress that reinforces the importance of leveraging data as a way of working with more digital marketers and accessing incremental budgets.
Turning to Airports, our business remains robust, driven by continued strength across multiple verticals. We’re leveraging the premium nature of our inventory to drive campaigns for major brands looking to connect with millions of travelers. We continue to invest in digital displays across our airports, including in the New York and New Jersey airports. We recently installed a mix of highly visible dynamic digital platforms that are providing us with additional premium inventory in these key high-volume locations to sell, allowing us to take greater advantage of strong demand.
Europe-North is also continuing to deliver great results, with the second quarter on track, to continue the strong momentum seen in the first quarter as well as last year, with growth continuing in the largest markets, the UK, Sweden and Belgium. The momentum in the second quarter has been buoyed by advertiser commitments around the European Football Championship. The continued strength in the business has been particularly impressive given the ongoing M&A efforts.
Moving to our balance sheet, in March, we announced the refinancing of our term loan and the CCIBV notes that extended our 2025 and 2026 maturities, and created flexibility, supporting the M&A process in Europe. Dave will go through the details, but I do want to congratulate the team on successfully executing these transactions at, what we consider, favorable rates in a volatile market. With regard to our guidance, Dave will also expand on the details later but I want to highlight we are confirming our full year revenue guidance, which is expected to increase mid single-digits over last year, excluding movements in foreign exchange rates.
So overall, we’re pleased with our performance. In addition to benefiting from the overall growth of the economy, we’re seeing positive impacts on various levels from our investments in digital, in our sales teams, in our new website, and of course, in programmatic and data analytics. These initiatives all bode well for our longer term growth profile. On the M&A front, we are in negotiations on the sale of our Europe-North segment and we continue to engage with potential counterparties in LatAm. We will update the market as and when we’re able.
With that, let me hand the call over to Dave. As you may know, Dave was promoted to CFO on March 1. He has made a seamless transition, and I look forward to a strong partnership with him as we move forward in executing our strategic plan.
David Sailer
Thanks, Scott. Good morning, everyone. I’ve appreciated the support all the teams have provided me as I transitioned into this new role.
Please see Slide #5 for an overview of our results. As a reminder, Europe-South is included in discontinued operations. Additionally, during our discussion of GAAP results, I’ll also talk about our result excluding movements in foreign exchange rates, a non-GAAP measure. We believe this provides greater comparability when evaluating our performance. Direct operating expenses and SG&A expenses include restructuring and other costs that are excluded from adjusted EBITDA and segment adjusted EBIT. The amounts I referred to are for the first quarter of 2024 and the percent changes are first quarter 2024 compared to the first quarter of 2023, unless otherwise noted.
Now on to the first quarter reported results. Consolidated revenue for the quarter was $482 million, a 10.1% increase. Excluding movements in foreign exchange rates, consolidated revenue for the quarter was $478 million, up 9.3%. Loss from continuing operations was $89 million, an improvement as compared to the prior year. Consolidated net loss, which includes the loss from discontinued operations, was also $89 million. Adjusted EBITDA was $97 million, up 53.6%. Excluding movements in the foreign exchange rates, adjusted EBITDA was up 53%. The increase is largely driven by America and Airports. AFFO was negative $16 million in the first quarter, an improvement of 62.6%. Excluding movements in foreign exchange rates, AFFO was up 61.6%.
Onto Slide #6 for the America segment for first quarter results. America revenue was $250 million, up 5.8%, reflecting increased revenue in all regions. Billboard revenue was higher, driven by increased demand and digital deployments, with growth both in print and digital bulletins. Digital revenue, which accounted for 33.7% of America revenue, was up 7.9% to $84 million. National sales, which accounted for 34.5% of America revenue, were up 5.5%. Local sales accounted for 65.5% of America revenue, and were up 6%. Direct operating and SG&A expenses were flat, with 2023, at $155 million. Higher compensation costs largely driven by increased headcount, and pay increases, are offset by lower credit loss expense. Site lease expense was down slightly, driven by the renegotiation of an existing contract.
Segment adjusted EBITDA was $95 million, up 17.3%, with a segment adjusted EBITDA margin of 38.2%, an improvement over the prior year. The improvement in segment adjusted EBITDA margin was driven by the strong revenue performance in addition to the lower credit loss expense and favorable revenue mix.
Please see Slide #7 for a review of the first quarter results for Airports. Airports revenue was $77 million, up 43%, with strong demand across the portfolio. Digital revenue, which accounted for 55.4% of airports revenue, was up 44.1% to $43 million. National sales, which accounted for 55.2% of Airports’ revenue, are up 25.5%. Local sales accounted for 44.8% of Airports’ revenue, and were up 72.8%.
Direct operating and SG&A expenses were up 21.9%, to $58 million. The increase is primarily due to a 21.4% increase in site lease expense to $44 million, driven by higher revenue and an increase in compensation costs largely driven by higher sales commissions. Segment adjusted EBITDA was $19 million, up 204.6%, with a segment adjusted EBITDA margin of 24.8%. The improvement in the segment adjusted EBITDA margin is driven in large part by the increase in revenue in the quarter.
On to the Slide #8. For a review of our performance in Europe-North, my commentary on Europe-North is on results that had been adjusted to exclude movements in foreign exchange rates. Europe-North revenue increased to 5.9% to $136 million due to higher revenue in the UK, Sweden and Belgium, driven by increased demand and digital deployments, partially offset by the loss of a transit contract in Norway.
Digital accounted for 52.4% of Europe-North total revenue and was up 9.1% to $71 million. Europe-North direct operating and SG&A expenses were down slightly to $121 million due to a decrease in site lease expense, which was down 5.8% to $53 million, driven by the contract loss in Norway. This was partially offset by higher compensation costs. Europe-North segment adjusted EBITDA was up 92.5% to $14 million, and the segment adjusted EBITDA margin was 10.1%, an improvement over the prior year. The first quarter historically has the lowest segment adjusted EBITDA, resulting in margins being more sensitive to fluctuations in revenue and contract mix.
Moving onto CCIBV on Slide 9, Clear Channel International B.V. or CCIBV, an indirect wholly-owned subsidiary of the company and the borrower under the CCIBV term loan facility, includes the operations of our Europe-North and Europe-South segments as well as Singapore, which is included in other. The financial results of Singapore have historically been immaterial to the results of CCIBV, and revenue and expenses for this business were further reduced in the first quarter of 2024 due to the loss of a contract.
As the current and former businesses in Europe-South segment are considered discontinued operations, the results of these businesses are reported as a separate component of consolidated results in the CCIBV consolidated statement for all periods presented and are excluded from the discussion below.
CCIBV results from continuing operations for the first quarter of 2024 as compared to the same period of 2023 are as follows: CCIBV revenue increased 3.8% to $140 million from $134 million. Excluding the $3 million impact of movements in FX, CCIBV revenue increased 1.4%, as higher revenue from our Europe-North segment, as I just mentioned, was partially offset by the loss of a contract in Singapore. CCIBV’s operating loss was $7 million compared to the operating loss of $18 million in the same period of 2023.
Now moving to Slide 10 and our review of capital expenditures. CapEx totaled $24 million in the first quarter, a decrease of $9 million over the prior year due to timing of CapEx spend in both America and Airports.
Now onto Slide 11. During the first quarter, cash and cash equivalents decreased by $58 million to a $193 million, primarily as a result of $127 million in cash interest payments, which included an additional $48 million in payments due to timing. Specifically, the cash paid for interest during the first quarter increased $55 million compared to the same period in the prior year. Approximately $48 million of this increase is related to the timing of interest paid early, as a result of the debt refinancing transactions in March 2024 and the payment of the first semiannual interest payment on the CCOH 9% Senior Secured Notes issued in August 2023. The remaining increase is due to higher interest rates on the term loan facility.
Our liquidity was $389 million as of March 31, 2024, down $97 million compared to liquidity at the end of the fourth quarter, due to the decline in cash and cash equivalents, as well as the decrease in the availability under the Receivables-Based Credit Facility due to lower net receivables at the end of the quarter.
Our debt was $5.7 billion as of March 31, 2024, a slight increase compared to December 31, 2023, due to the refinancing in March. As Scott mentioned, we successfully executed debt transactions with favorable terms during the quarter that improved our balance sheet by deferring our near-term maturities and reducing our anticipated cash interest payments in 2024 by approximately $80 million as a result of the refinancing.
On March 18, 2024, we issued $865 million aggregate principal amount of 7.875% Senior Secured Notes due 2030, and used a portion of the proceeds there from to prepay $835 million of borrowings outstanding under our term loan facility. At the same time, we amended our Senior Secured Credit Agreement to, among other things refinance the $425 million remaining principal balance on the term loan facility and to extend its maturity date from 2026 to 2028.
On March 22, 2024, CCIBV entered into a credit agreement comprising 2 tranches of term loan, totaling an aggregate principal amount of $375 million, which mature in 2027, and used the proceeds there from to redeem all of the outstanding CCIBV 6.625% Senior Secured Notes due 2025. Our weighted average cost of debt was 7.4%, a slight improvement over year-end. As of March 31, 2024, our first lien leverage ratio was 5.38x, an improvement over year-end. The credit agreement covenant threshold is 7.1x.
Now onto Slide 12 and our guidance for the second quarter and the full year 2024. All consolidated guidance and Europe-North guidance excludes movements in foreign exchange rates, with the exception of capital expenditures and cash interest payments. For the second quarter, we believe our consolidated revenue will be between $547 million and $572 million, representing a 3% to 8% increase over the second quarter of 2023. We expect America revenue to be between $290 million and $300 million, and Airports revenue is expected to be between $82 million and $87 million. Europe-North revenue is expected to be between $155 million and $165 million.
Moving onto our full year guidance, we are confirming the full year guidance for revenue, adjusted EBITDA and CapEx provided in February. Cash interest payments, loss from continuing operations and AFFO have been revised to reflect the recent refinancings and other updated information. We expect consolidated revenue to be between $2.2 billion and $2.26 billion, representing a 3% to 6% increase over 2023.
America revenue is expected to be between $1.135 billion and $1.165 billion. Airports revenue is expected to be between $345 million and $360 million. Europe-North revenue is expected to be between $635 million and $655 million. On a consolidated basis, we expect adjusted EBITDA to be between $550 million and $585 million. AFFO guidance is $80 million to $105 million. Capital expenditures are expected to be in the range of $130 million and $150 million with a continued focus on investing in our digital footprint in the U.S.
Additionally, we anticipate having cash interest payment obligations of $436 million in 2024 and $425 million in 2025. The expected increase in cash interest payments in 2024 compared to the prior year is largely due to differences in the timing of interest payments. We expect $93 million of cash interest to be paid in the second quarter. This guidance assumes that we do not refinance or incur additional debt.
And now let me turn the call back to Scott.
Scott Wells
Thanks, Dave. To recap, we’re positive about the trends we’re seeing in our business and our team’s disciplined focus on executing our plan. Our performance is broad-based across the portfolio and our outlook remains positive. In the U.S., we’re making good progress in leveraging the investments we’re making to modernize our platform and expand the range of advertisers we can serve. At the same time, we remain committed to streamlining our organization with a focus on our America and Airport segments.
Summing up, with our operating progress and the refinancings, we’ve reduced exposure to rate hikes, retained optionality to hedge down or refinance as rates move down and created room for adjusted EBITDA growth by moving our maturities out. And if you take our full year AFFO guidance and include our discretionary CapEx, we expect to be close to positive cash flow in 2024, looks like pretty good progress from our point of view. Many thanks to our company-wide team for their ongoing contributions as we pursue growth this year.
And now let me turn over the call to the operator, and Justin Cochrane will join us on the call.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] The first question today comes from the line of Cameron McVeigh with Morgan Stanley. Please proceed with your questions.
Cameron McVeigh
Hi, guys. Thank you. Scott, I thought it was interesting your Americas performance in national and local versus some of your peers. I was hoping you could discuss maybe in your view, why there’s a divergence. And any other color on your view of the current state of the ad market? And then secondly, how would you suggest we think about AFFO growth beyond 2024? Thanks.
Scott Wells
Thanks, Cameron, yes. I mean I think there’s a lot of things going on, and it’s always hard to bridge with a competitor where we don’t know exactly how they calculate the numbers and how they choose to report them. I think as we’ve said, and I do think this is pretty consistent, what we call national is tied to the biggest agencies and the business placed by the biggest agencies. That’s how we get at the metric. And as we look at it, I mean, I think you can see a couple of things just in our numbers. If you look at America versus Airports, national grew 5x as much in Airports as it did in America in the roadside business. And I think that speaks to the challenge of thinking of national as a singular thing. So it’s a hard number to compare.
I do think we have some things flowing through there that are probably differential, particularly related to the pharma vertical. I think we are having success in that and are blazing the trail in that and that we probably don’t have – our competitors probably don’t have as much of that flowing through. I don’t have – I think probably the only other thing I’d call out that’s tangible is you may recall from Q1 last year, we had a pretty rough Q1 last year, and that was at least partly because of challenges in California, particularly in Northern California, and that has stabilized and started to move in the other direction. I won’t say that it’s fully where it needs to be, but it’s at a significantly better place than last year. And I think that, that probably colors those numbers as well. Those would be the things that I would pick off. I don’t know, Dave, if there’s anything that jumps to your mind.
David Sailer
No, no. I think that covers it.
Scott Wells
And then do you want to take the AFFO?
David Sailer
Yes. When you’re thinking about AFFO, as we’re moving forward, the components of AFFO, when you think about our interest and what we did in the month of March, which I was very pleased with, with the pushing out of our maturities for our notes that were due in ‘25 and ‘26, and they were pushed out to 2027, 2028, and some of the term loan was pushed out to 2030 with the notes that we issued. But from an AFFO standpoint, I feel like a lot of the components, interest, maintenance capital will – should be pretty similar to where we are this year. I think the growth in our EBITDA is really going to drive our AFFO higher as we get into next year.
Scott Wells
Yes. And Cameron, you had asked about the general ad market. I’m sorry, I left that one off in my opening trying to bridge to numbers that I don’t know what I’m bridging from. So just in terms of the ad market, I think I’d characterize it as the local market remains strong and pretty broad-based, business services, amusements, really a number of retail, a number of verticals doing really well in that space. In national, entertainment is picking up, media is picking up. I think tech is picking up – so I think there are a number of things moving in the right direction. We had hoped to see more activity in auto insurance this year, and that has not come together so far. There have been a lot of conversations, but no significant orders.
I think the broader health care set aside pharma, the broader healthcare space, which is partly local, partly national, but a lot of cross market, a lot of kind of regional healthcare, that hasn’t been great. So it’s a mixed market. I mean we’re trying to characterize it down the middle of the fairway here and not get overexcited about the relative Q1 performance and trying to focus on bringing in incremental business as the year goes on. So I think that’s kind of the best snapshot I can give you at this point. Hopefully, that helps.
Cameron McVeigh
Definitely. Thank you, both.
Scott Wells
Thanks, Cameron.
Operator
Our next question is from the line of Daniel Osley with Wells Fargo. Please proceed with your question.
Daniel Osley
Thank you. So we are impressed with margins across segments in the quarter, but we were also a bit surprised that the strength didn’t flow through to the full year EBITDA raise. Were there any timing-related factors that impacted the quarter? And can you help us to generally impact some of the margin puts and takes between sales build-out, site lease negotiation and contract losses? Thank you.
Scott Wells
Why don’t I hit on part of this and then I’ll have Dave add in some of the detail on margins. When we do our annual guidance, we have pretty good visibility to where Q1 is going to come in. And so I mean, I’m intrigued with – I think the core issue here is just that particularly in Europe and to a degree in airports, Q1 is always such a small part of the annual number that the percentages can get pretty gaudy pretty quickly. Last year, in airports, in particular, that worked against us. This year, it worked in favor of us and international also worked in favor of us. So I guess what I’d tell you is we had pretty good visibility to where Q1 was going to be when we guided – and so there wasn’t a sense on our side of needing to up the guide at this point. This was not particularly surprising from where we sat as we look at the full year.
I don’t know, Dave, if you want to talk about the puts and takes part of the question.
David Sailer
Yes, absolutely. And when I think about the guidance from a revenue standpoint, we were within our guide in Q1. But Q1, as Scott mentioned, is it’s a smaller EBITDA amount in each of our segments. So if you get a couple of one-timers going each way or a little bit of favorability, it is going to have a bigger impact on your margins in the first quarter as opposed to the Q2 through Q4. If I kind of unpack it by segment, for America, we were up 6%, first quarter of 2023 wasn’t the strongest. And I’d probably say the biggest impact is when we had – we had growth of 6% and expenses are roughly flat because of a credit loss. And we had savings there. We had some bad debt in the first quarter of last year that obviously didn’t repeat in the first quarter of this year for America and collections were actually very strong. That’s probably driving that increase.
Airports is different. We had our tough first quarter in 2023. And for 2024, we were up 43%. And we’re continually to get COVID site lease relief, very slimmer to what we got last year in the first quarter. So when you have that incremental revenue growth, that’s really going to have a big impact on your margins. And when you think about airports going forward, because I know this question will come up, the margins will be elevated in 2024 similar to 2023, because slightly COVID relief is still going to trickle in. We’re not 100% sure what quarters will fall in, but we do expect to get some. So we always talk about our airports business that it’s a high-teens business, as revenue grows, you’re going to get to the higher teens, maybe up to about 20%. But this year, you’ll be higher just because of the relief you’re getting.
And for Europe-North, their EBITDA is smaller in the first quarter. They obviously grow throughout the year and each quarter gets stronger. But with $7 million of EBITDA in the first quarter of 2023, they had very good top line growth. We spoke about earlier, lost contract in Norway. So when your site lease goes down and their expenses are roughly flat and they have top line growth. That’s really what’s driving that margin impact, especially because the numbers are small, it’s going to be definitely a little bit higher.
Daniel Osley
Thank you.
Operator
Our next question is from the line of Avi Steiner with JPMorgan. Please proceed with your question.
Avi Steiner
Thank you very much. I’ve got a couple here. One, just given the markets you’re in, and I think, Scott, you may have touched on this, but curious how you think about the media and entertainment category and particularly as we kind of move to the second half of the year and we kind of lap some – the impact of strikes and some other issues. And then I had a couple more. Thank you.
Scott Wells
Yes. I mean I think media and entertainment obviously slowed us down in Q4. It was doing kind of okay in Q1, and that was off of not great comps in Q1 of ‘23. That was before the strikes, but it just – that had not been a particularly strong quarter. And I think as it builds, I think we’re going to see it continue to perform. There’s nothing that we’re hearing that suggests a lot of softness there, but – or a lot of – what’s the right word? It is – so you don’t have the streaming wars going on right now. That was a high point in media and entertainment time. So it’s not going to be as vibrant as that era. But without the strikes going in, with a pretty good release schedule, the movie part of media and entertainment looks like it should be solid through the year. I think the streaming content and television parts of it are a little more idiosyncratic, and you kind of have to get company by company and the book of products that each of these companies have. And so you’re going to have puts and takes within that. But I think it will be a growth category for us this year, Avi. That would be top line, how I’d characterize it.
Avi Steiner
Appreciate that. And then just on Europe-North, even with some puts and takes, it seems to be performing quite well [indiscernible] comments in the opening about some buoyancy there. And I’m just curious how that backdrop might be impacting the process you’re going through there, if at all, and how you think about those assets? And then I have one more. Thank you.
Scott Wells
Yes. I mean I think I would not look at near-term or short-term performance being a direct factor in how things sort out. If anything, it supports the dialogue. It makes the perceived value of the assets to us go up every time that the performance goes up. And so that’s a factor that comes into play. But we’ve been real clear that our intention is to become a U.S.-focused business. So the fact that it’s performing well, and I’m extrapolating from your question a little bit, Avi, the things you’ve asked me in times past, it hasn’t at all, in any way, changed our intention on that. And as I said in the opening script comments, we are in negotiations with a buyer at this point. And I’m not going to go into any more detail on that in case anyone else wants to ask on that one, that’s what you’re getting. But the process is progressing. I think strong performance supports that as we work through it, but it’s not going to change the answer or the viewpoint on what our portfolio should look like downstream.
Avi Steiner
No, that’s a great place for me to leave. And I will turn it over. Thank you very much for the time everyone.
Scott Wells
Thanks, Avi.
Operator
Our next question is from the line of Lance Vitanza with TD Cowen. Please proceed with your questions.
Lance Vitanza
Hi, thanks for taking the questions, and great quarter. The Norway contract loss that you called out in the prepared remarks, could you give us just a little bit more detail? I mean, I know that this asset is ultimately going away, but I’m just curious what was this contract, who did you lose it to? Had the contract been profitable? Did you let the contract go or was this a disappointing loss for you? And then maybe most importantly, does it impact your ability to sell Norway one way or the other? Thanks.
Scott Wells
So I’m going to ask Justin to opine on Norway on that particular contract.
Justin Cochrane
Yes, sure. Thanks, Scott. So this was a transit contract centered around the Oslo Metro. So it was a relatively big contract for us, relatively low margin. We lost it in a public tender. It’s always the case for the contract, you’re only willing to bid the level to which you’re willing to bid to make it worthwhile doing it. We bid to the level that we were very happy with. We didn’t win the contract. The contract was won by JCDecaux. And we then move onto our plan b and continue to grow the business. So like I said, it was a lower-margin contract. We have plans to replace it with smaller, higher-margin contracts and those plans are going well.
Lance Vitanza
Great. Thanks. And then, Scott, you talked quite a bit about Hollywood, but the Bay Area and Silicon Valley, I think, has also been a particular soft spot for advertisers as of late, but likely recovering? Or how far back is your business in that region? Is it 80% back? Is it 90% back? And if you could distinguish between what you saw in the first quarter and then what you’re seeing today as we sit here in May, if there has been any additional change. Thanks.
Scott Wells
Yes. I mean we have a really enormous footprint over the Bay Area, all the way from Silicon Valley up through San Francisco into Oakland and then into the surrounds. And I’d tell you that when you talk about percent back – it’s been a little bit – I mean throughout its history, San Francisco has been a boom and bust city. And it busted hard in COVID, but it actually came back and it really boomed when it came back, and it came back very strong in ‘21 and ‘22 until the latter part of ‘22, and then you started having the whole narrative about downtown San Francisco and homelessness and lawlessness and shop lifting and retailers leaving and all those kind of things that kind of came out in late ‘22 into early ‘23. And the city has done a number of things since then, including a number of ballot initiatives passing, increasing policing and working to get streets cleaned up.
I think that to characterize it as like a percentage back it’s hard for me to do, because it is not anywhere near its full potential right now, but it is – it’s back to growing and it’s moving in the right direction. And I would tell you that tech, in particular, that vertical in the city is coming back very nicely and that we’re definitely seeing positivity from out of that market. But I think it’s going to be a little while still until national advertisers decide that they want to weigh in. And national advertisers have always been an important part of the media mix there. I mean it’s a really interesting dynamic, because if you think about where a lot of our like street furniture assets are in the city, which are some of the assets that have been hit hardest, the neighborhoods in San Francisco are actually doing incredibly well. They like main streets in Noe Valley or in the Marina or Cow Hollow, the various neighborhoods.
The neighborhoods are doing really, really well, where there is a perceived softness and there’s some actual softness. Although I go to San Francisco a couple of times every year, and I’d tell you it is considerably better now than it was 2 years ago. So I feel good about the trend line. The city is on. I feel good that our team, our local team, in particular, has really stepped up and is taking on the challenge of covering for those national advertisers not being as vibrant there. And I think we see good things ahead for San Francisco.
Lance Vitanza
Great. Thanks so much.
Scott Wells
Thanks, Lance.
Operator
Our next question is from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.
Aaron Watts
Hi, everyone. Thanks for having me on. One follow-up on the national ad performance, which obviously was quite good in the quarter, I am curious Scott, your view on the recent introduction of several ad-supported streaming offerings, providing more targeted video inventory. Do you see that as a potential headwind at all for your business here in the U.S.?
Scott Wells
I don’t think so. And part of why I don’t think so is because I think they are an enormous threat to linear TV, and linear TV is struggling. I think what they might do is they might prevent us participating in the transition of advertisers out of linear TV as much as we might have otherwise. So, I guess in that regard, it is a bit of a challenge. But overall, I don’t think that they are a particular threat to us. I think they just speak to, and it’s one of the real frustrations in the U.S., because that linear TV transition in the rest of the world, it’s true in LatAm, it’s true in Europe. We are seeing money coming out of linear TV and going onto our assets in international markets to a degree that we are not seeing it as much here. And we are seeing some here, but the magnitude of it in international markets is much higher. And it’s a lot of the same brands. And so it’s just interesting that the brands gravitate to out-of-home more in other markets than the U.S. Some of it is they do like the street furniture assets that’s a little closer to point of sale. But when we look at it analytically, the impact of the roadside is similar to what the impact of street furniture is for many use cases. So, it’s a little bit of a head-scratcher to us that more of that linear TV money doesn’t come here in the U.S., but that’s the dynamic. So, I don’t think it’s a huge threat and it is in some ways, an opportunity because they are promoting these ad-served businesses on our signs. So, there is opportunity in there, too.
Aaron Watts
That’s helpful perspective. If I could ask one last question just around the capital structure, you have highlighted all the work you have done to extend out maturities. You have got a clear runway for the next couple of years. Given the current rate environment, do you take a pause on that front now? And then relatedly, any other levers aside from growth in the business that we should be thinking about over the near-term horizon to accelerate the deleveraging process?
David Sailer
From what you are saying, as we pushed out the maturities there, we are obviously extremely pleased with what went on in the month of March, pushing out B.V. notes to 2027, which obviously would be tied to the process that we are running overseas in Europe that Scott mentioned earlier. But look, we are always going to monitor the market, and we saw that opportunity in March, and we went forward and I think it was very successful from our standpoint. Where rates have honestly have gone since that point in time, the opportunity is not there. But look, we will monitor the market. If there is an opportunity to lower our cost of debt, we will – obviously, we will look at it, but the economics have to be compelling. When you are thinking about deleveraging, yes, obviously, pushing out our maturities, 2027 into 2028, that really gives us that runway from an EBITDA standpoint to really grow the business. And as we go through the process in Europe and as those proceeds come out, some of those proceeds will obviously go to the B.V. notes or the B.V. term loan as it is today. And then the remaining proceeds can be – we have 18 months to kind of reinvest in the business either through CapEx or acquisitions. So, I think there will be options at that point in time to kind of take a look at it.
Scott Wells
Yes. And I think to the other part of your question of what to look for, I think we have been pretty clear that we have had a lot of our kind of structuring and deal creativity focused on Europe and on the international divestitures for the last couple of years. As we successfully work our way through those processes, that capacity will become available to us in the U.S. And there is a lot of interest in this sector and a lot of different ideas that come our way. And I think as we simplify and clarify the business, our ability to do something creative is good. But I am not going to direct you as to what that creative thing might be, because as you are very well aware, the variety of things that we could do is broad. And you should just expect that the creative energy that we have been expending to position ourselves for the divestitures we have been working on is energy that we will be able to deploy on working on structuring things here in the U.S. downstream.
Aaron Watts
Great. Thanks Scott. Thanks Dave.
Operator
Our next question comes from the line of David Karnovsky with JPMorgan. Please proceed with your question.
Unidentified Analyst
Alright. Thank you. This is Ted on for David. I have two questions. The first is on the 2024 AFFO guide. Just wanted to ask about the source of the upside there relative to keeping revenue and EBITDA the same. Is that primarily from Q1 flowing through to the full year or is there anything…?
David Sailer
No, there is really nothing major there. It’s just us refining our estimates. There was really an adjustment in our deferred tax asset, which kind of flows through to that calculation. From an overall tax standpoint, our cash taxes, which are minimal for the year, mostly focused around some international and in the U.S., local and state. I don’t see any major differences from what we paid last year from a cash standpoint and our projections for 2024.
Unidentified Analyst
Got it. Thank you. And then I wanted to ask on programmatic, just wanted to ask about the source of strength for the quarter and expectations moving forward.
Operator
Ladies and gentlemen, please standby. We are experiencing technical difficulties. Our conference will resume momentarily. Thank you. Please continue with your questions.
Scott Wells
Hey Ted, sorry, we lost you as you were starting your second question. I am not sure we had a little power surge or something knocked us out, off our line, but we are back.
Unidentified Analyst
Thanks. The question was basically about Q1 programmatic strength and the source of that and what your expectations are for programmatic for the rest of the year?
Scott Wells
So, programmatic has been ramping pretty well since kind of September, October last year. And there is a variety of drivers behind it. At least one of the growth programmatic accounts right now is actually coming off of direct business. And so that’s something we haven’t seen broadly. And so there is a little bit of – it’s coming out of the left pocket into the right pocket, and that is part of what’s going on. But I think the broader thing is that you have had the Trade Desk mainstream out-of-home and DV360 is in the process of mainstreaming out-of-home. And what that means is that your two biggest omnichannel DSPs are offering out-of-home, digital out-of-home in their base trading platform. And so we get consideration that way, and I think that’s at least part of what’s going on in addition to outreach to clients. There are a number of partners that we have had, some really good success, bringing new advertisers to the category. So, it’s a variety of factors behind it. I don’t think that the growth rate will stay as high as it’s been the last couple of quarters for the whole year. But I do think we expect it will be a double-digit growth rate. It just won’t be as high as it’s been in Q4 and Q1.
Unidentified Analyst
Thank you.
Operator
Our final question is from the line of Jim Goss with Barrington Research. Please proceed with your question.
Jim Goss
Hi there. Thank you. The movie advertising is going to be very immediate, obviously. Just coming out of CinemaCon, there is a lot of enthusiasm for ‘25 and ‘26 with return of film flow, but a very current tough environment over the next couple of quarters. I am wondering how big a drag do you think that can be and what your optimism is for next year? And also the mix of small screen versus big screen in terms of importance to your markets, I think it’s mostly a big screen, but tell me otherwise.
Scott Wells
Thanks Jim. Yes. No, you are absolutely right. We are more big screen oriented. We get some small screen, but not – that’s not the prevalent part of our mix. I think we – your characterization of the release schedule is maybe a little darker than what I hear. But that – I am not disputing that ‘24 will not be as good as ‘25. So, I do think that this is something that can be a multi-quarter positive category for us. It’s not an enormous part of our book. So, I don’t think I would characterize it as it’s going to make or break how ‘24 goes or what ‘25 can be. But with the political year where we don’t get a ton of direct political, although we are working very hard on that, but we don’t have a lot of direct political built into our guide, so that would be upside for us in ‘24 if we actually crack that one. But with a year that has political, we are going to see overflow coming to us of people that are getting crowded out in the TV space or that want to find other ways to reach audiences that are fatigued with the 17th political ad in a row on the breaks in their sports that they are watching. So, movies can be a welcome growth driver in 2025. And I think we share your optimism for how that release schedule is going to look, and that should help offset some of the political comp that we build this year into next year. But again, it’s not going to make or break our business.
Jim Goss
Okay. Thanks. The other area I would like to touch on briefly, if I got it straight, you said airport margins should probably be high-teens business in general, but can vary quite a bit. And I am wondering if you might talk a little bit about the drivers you think are important in terms of either travel trends, the volume of the travelers, business versus personal and how that’s going to affect the revenue side and what you think might be impactful in terms of the expense side?
Scott Wells
So, let me start on the revenue side, and then I will let Dave dig in on the expense side. We really have changed how we sell airports over the last few years. We have become more focused on creating experiences that are particularly compelling for advertisers, whether that’s doing sampling or other on-site experiences, taking over different assets like tunnels between terminals. We have done that in a number of airports. And so what you have seen in the last kind of 18 months has been the progression of us just getting better at monetizing those assets. And that’s something that I am challenging the team to apply some of that same kind of thinking to our roadside assets and we are starting to see some experiments along those lines playing out. But I think that the driver, so building out New York only was a big part of the driver. New York is largely built, although there will be meaningful projects as LaGuardia, some of the LaGuardia terminals finished, some of the JFK terminals finish, because there is still renovation going on there. So, there should be some more juice in just the expansion of that footprint. We have gotten much more strategic about where we deploy assets in different airports, and that’s been a tailwind of what’s going on. And you are going to have that pretty consistently. And until we get to where we have – the next big step back in airports will be when we lose a big contract, which inevitably at some point we will. There is nothing that we can see in front of us right now that we think is headed that way, and we have had good fortune doing direct extensions. But that’s the nature of that business. At some point, we will take a step back in one of the big airports that we are in, and that will be a headwind. I think in terms of the actual travelers and who the advertisers are trying to reach, we had done a really nice job of getting people bought into the idea that even if people were pleasure travelers, they still represented very attractive demographics within business decision-making. And as business travel has come back and business travel is getting back close to where it was pre-pandemic, that has been like a cherry on top for us, because for certain airports gives you really nice uplifts as the business traveler comes back. And so that’s been part of the revenue story, too. But those are the big drivers, sort of different selling, ongoing expansion of our digital assets, and the traveler continuing to come back and continuing to be a super attractive premium target. Dave, you want to talk to expenses?
David Sailer
Sure. Expenses, I would say, it’s definitely simpler than from a revenue standpoint. Obviously, there is a lot of drivers going into the fantastic revenue growth we have been seeing over the last several quarters. But from an expense standpoint, when you – the airports business, their biggest expense is site lease, what we pay to the airport authorities for the assets that we had in the airports. And when you think about that site lease, some of our or most of our contracts are a percent rent. The larger airports have a higher percent rent, lower – the smaller airports is slightly lower. So, your revenue mix actually has a big component of what your margins are going to be. And right now, I mean we are performing really well across all of those factors, which is really helping from a margin standpoint. And we also have a few airports that are – it’s a fixed mag. So, if you drive revenue above that, that’s going to drop right down to the bottom line. We definitely experienced that in the first quarter. And then I will go back to the relief that we are continually getting and we are going to get that throughout 2024 to a lesser extent than we had in ‘23. But those are two of the main factors that are really driving it from an expense standpoint. But as that revenue grows, you are going to have margin expansion and that’s what we were seeing.
Jim Goss
Great. Thank you very much. Appreciate it.
Scott Wells
Thank you, Jim.
Operator
Thank you. At this time, I would like to turn the floor back to Scott for closing comments.
Scott Wells
Great. Thank you, Rob, and thank you to all of our questioners and for putting up with our little technical glitch there. Sorry for that brief window of silence. We appreciate your attention. We feel good about the year and look forward to seeing you all or many of you in upcoming events in the coming weeks. Take care.
Operator
Thank you. This will conclude today’s conference. You may disconnect your lines at this time. We thank you for your participation and have a wonderful day.
