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Clear Channel Outdoor Holdings Inc  (NYSE:CCO)
Q2 2019 Earnings Call
Aug. 01, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Clear Channel Outdoor Holdings, Inc. 2019 Second Quarter Earnings Conference. [Operator Instructions] I'll now turn the conference over to your host, Eileen McLaughlin, Vice President, Investor Relations. Please go ahead.

Eileen McLaughlin -- Vice President

Good morning, and thank you for joining Clear Channel Outdoor Holdings 2019 Second Quarter Earnings Call. On the call today are: William Eccleshare, Worldwide, Chief Executive Officer; and Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings, Inc. In addition, Scott Wells, CEO, Clear Channel Outdoor Americas is on the call. We'll provide an overview of the 2019 second quarter operating performances of Clear Channel Outdoor Holdings, Inc. and Clear Channel International, B.V. After an introduction and a review of the quarter, we'll open up the line for questions. Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements. These statements include management's expectations, beliefs and projections about performance and represent management's current beliefs.

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 releases and filings with the SEC. Pacing data will also be mentioned during the call. For those of you not familiar with pacing data, it reflects orders booked at a specific date versus the comparable date in the prior period and may not reflect the actual revenue growth rate at the end of the period. During today's call, we will provide some performance measures that do not conform to generally accepted accounting principles.

We provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press releases and the earnings conference call presentation, which can be found on the Investors section of our website, www.investor.clearchannel.com. Please note that our earnings release and a slide presentation are also available on our website, www.investor.clearchannel.com, and are integral to our earnings conference call. They provide a detailed breakdown of foreign exchange and noncash compensation expense items as well as segment revenues, operating income and OIBDAN, among other important information. For that reason, we ask that you view each slide as William and Brian comment on them. Also, please note that the information provided on this call speaks only to management's views as of today, August 1, 2019, and may no longer be accurate at the time of replay.

With that, I will now turn the call over to William.

William Eccles -- Chief Executive Officer

Thank you, Eileen. Good morning, everyone, and thank you for taking the time to participate in today's call. I'd like to welcome all our stakeholders as we discuss our business for the first time since the completion of our separation from iHeartMedia. Brian will then review our second quarter results and discuss our financial position. As an independent company, we can now fully chart our own course as we seek to build on our momentum, fulfill our ambition and pursue the opportunities in front of us. I would like to acknowledge all our employees across our global operations for their hard work, talent and dedication to serving our advertising partners and contributing to our success, while also managing the process of separation from iHeart.

Bolstered by our recent steps to establish our new Board of Directors, strengthen our operating management across our regions and address our capital structure with last week's equity offering, we are now well positioned to build on our market leadership as we continue to execute on our strategic plan. Brian will discuss the equity offering in a moment, but let me just note that this marks a significant step in our focus on strengthening our capital structure. This is a period of strong projected growth for the out-of-home market compared to traditional media. The fundamentals of our sector are powerful, but when you layer on the positive impact of the tech field transformation which we are driving, we are confident in delivering significant growth opportunities. Since many of you are new to our story, I'd like to briefly recap our strategic position, outline our growth strategy and provide an update on recent developments.

Please turn to slide four. Our vision is to create a unique mass reach global media platform that delivers our clients' messages across our distinctive portfolio of digital and traditional displays. This vision is built on four key pillars. First, we are focused on growing the out-of-home medium. We believe we are well positioned to benefit from the unique positive audience trends and intrinsic strength of our medium. More and more people spend more of that time out-of-home, and as other traditional media fragment, we continue to build on our position as the last broadcast medium. And we are building on our unique global footprint across key markets with core strong strengths. Second, we are focused on building on our technology leadership. We believe we are a pioneer in the space and that we continue to lead the industry in leveraging technology and data to make outdoor advertisements even easier to plan, buy and measure.

And we are continuing to improve out-of-home's core proposition through our digital displays, making the medium even more flexible and creative. Third, we are focused on partnering with our customers. We are further building on our sales excellence with sophisticated revenue management tools aimed at deepening our relationships and optimizing the yield of our asset base. And fourth, we will continue to evaluate opportunistic expansion. We are focused on leveraging our strong operational performance to optimize our capital structure now that we are an independent company. We'll continue to evaluate opportunities to expand our portfolio with new contracts and potential tuck-in acquisitions. Please turn to slide five. We have a tremendous platform to work with. With a diverse portfolio of 450,000 print and digital displays in 31 countries, reaching millions of people monthly, Clear Channel Outdoor is one of the world's largest outdoor advertising companies.

A true global business, we run our operations through 2 distinct and separate segments, the Americas and International. In the U.S., we are in 43 of the top 50 markets and all the top 20 DMAs. Our business is primarily driven by large-format billboards, while our international business in Europe, Asia and Latin America is predominantly supported by street furniture, small format displays located in city centers and close to point of sale. All told, on the digital front, we have a growing digital platform spanning more than 14,000 digital displays in international markets and more than 1,600 digital displays in the U.S. We believe there's no doubt we have superior assets located in the markets where major advertisers want to be. Moving to slide six. From a macro perspective, the out-of-home market holds a unique position in the media mix due to its 2 core roles. Firstly, it is a true mass reach medium, delivering real brand fame with the broadest and most efficient reach in an increasingly fragmented media universe. For example, in the U.S., we reached 91.9% of all adults weekly, and in the U.K., we reached 99.4% of all adults weekly, higher than any other media.

Out-of-home advertising is also very much an activation medium, reaching consumers right at the point of purchase, and that ability to directly influence the so-called last moment of truth for consumers is a very critical piece of the marketing mix and a major driver of sector growth. As a result, the out-of-home sector has consistently outperformed all other traditional media, a trend that is expected to continue in the coming years. Another key reason for this is that our audience is not impacted by the same audience fragmentation as other traditional content-based media. Our audience is there in the street, on the highway, in the airport or rail station or at the shopping mall. Not only is that audience growing, but we are getting better in measuring it using sophisticated data and analytics to prove attribution and ROI.

Please turn to slide seven. The installation of digital screens globally has completely transformed the oldest advertising medium into one at the forefront of media, offering advertisers an infinite range of creative possibilities and flexible solutions to reach and engage target audiences at the right time and in the right place. For perspective, in the U.S., we installed 26 new digital billboards in the quarter to reach a total of more than 1,300 digital billboards, and we now have more than 1,600 digital displays which represents approximately 32% of our U.S.-based revenues in the second quarter. And in our international markets, we installed 491 digital displays for a total of more than 1,400 -- 14,000 digital displays as of June 30 and accounting for close to 30% of our international revenue excluding China in the second quarter. Our leadership in supporting and expanding the creative boundaries of our medium with evidence at this year's Cannes Lions International Festival of Creativity. For the 10th consecutive year, we sponsored the Outdoor Lions category, celebrating and championing outstanding creative achievement in out-of-home.

We also partnered with some of the world's most recognized brands to showcase the creative, dynamic and targeted possibilities of digital out-of-home through the use of artificial intelligence, dynamic real-time messaging, integrated user-generated content and geolocation data, among other innovations. Leveraging all our resources, we remain focused on pursuing and winning new contracts, both internationally and in the U.S. Our recent Paris win, which I will discuss in a moment, is one example of the power of our platform and the innovation we bring to mass deployment in urban centers. We're making progress in executing against our plan at all levels. But I also want to emphasize that as an independent company with a focus on driving results for our shareholders and ultimately reducing our leverage, we are operating with a heightened sense of discipline in our spending as well as a clear emphasis on seeking innovative avenues to manage our costs. As you will see in the results, which Brian will review in a moment, we are continuing to see momentum in our business with particular strength in the U.S. offset in part by continued softness in China, which we noted on our last call. In China, we own just over 50% of the publicly listed company, Clear Media Limited.

The business has delivered exceptional results for a number of years. However, starting with the fourth quarter of last year, they have experienced flat to declining revenues due to the slower economy and their e-commerce and IT industry customers remaining cautious with their spending. Clear Media has put in place a plan to broaden their customer base and reduce their dependence on large customers from the tech sector. In addition, they are also realigning their sales organization and implementing cost-saving initiatives to address the shortfall in revenue and higher rental payments. It's still early in the process, but we believe they are moving in the right direction.

Moving to slide eight. In the Americas region, our local business continues to deliver solid growth, and we are capitalizing on the strength of the national out-of-home market, in particular, with strategic initiatives we've been developing over time. Some of those initiatives include our national team expanding our direct-to-client selling capabilities and developing our ability to respond rapidly to RFPs and improving our sophisticated revenue management tools. This is on top of what we are doing with our proprietary RADAR platform, which is impacting both local and national clients, and we'll detail a bit later. Major advertisers are moving from other media including TV and digital to out-of-home in the larger markets as they learn about the effectiveness of our medium in targeting specific audiences and employing data analytics to maximize impact and measure success.

We are continuing to benefit of advertisers' battle for customers in key sectors such as streaming, food delivery services, virtual meeting services and technology. Our sophisticated revenue tools allow us to manage pricing as occupancy improves. On the technology front, we continue to progress in our efforts to develop our omnichannel suite of tools driven by our access to data from over 1/3 of mobile phones in the U.S. Branded as CCO RADAR, this suite of proprietary mobile data solutions makes it as easy for brands to plan, buy and measure as an online campaign but with the increased impact on brand safety of the core out-of-home proposition. Importantly, these tools were developed and continuously enhanced based on direct feedback from our clients, making them even more powerful in delivering consumer insights and making them immediately useful to the ad-buying process.

To that end, we are very excited about the recent addition to our RADAR line of solutions. Launched in June, RADARSync directly addresses our clients' needs by augmenting our RADAR offering to enable brands to integrate their unique proprietary data sets into our industry-leading planning and analytics platform. RADAR proof has already been providing advertisers with insights from the analysis of aggregated and anonymous mobile data, illustrating the behaviors of audiences exposed to out-of-home campaigns. This new innovation builds on the value of our related RADARView dynamic campaign planning tool by allowing advertisers to leverage first and third-party data to connect with audiences based on consumers' online and off-line behaviors. Simply put, RADARSync further strengthened our ability to help our clients to understand the actions consumers take in response to our ads in both the online and offline worlds, delivering scalable cross-platform solutions that drive measurable outcomes. Please turn to slide nine. On the international front, we are very pleased to have been chosen to partner with the city of Paris to 2024 in modernizing and bringing its street furniture to life across the city.

A transformative win for our French business, this is one of the largest out-of-home contracts in Europe and will enhance our ability to deliver a full national network. Under the new contract, Clear Channel France will operate 1,630 street furniture units in the French capital, enabling brands to reach up to 85% of the Greater Paris population each week. The street furniture will also be available as part of our national network nationwide campaign offering, which makes it possible for advertisers to reach more than 20 million French residents every week. We will begin installing the street furniture across the capital later this year with the first advertising campaigns on the new displays expected in the fourth quarter of this year. Our recent win in the municipality of Monaco is a great example of our smart city initiatives.

We are collaborating to upgrade bus shelters and bring digital technologies including smart city solutions to its streets. These new shelters feature interactive digital touch screen, are equipped with Wi-Fi hotspots, 4G and a smartphone charger and provide advertisers with a new way to deliver their brand image to an affluent audience. Our U.K. market continues to deliver exceptional growth with almost 60% of the revenues generated from digital from our extensive network of assets. We've extended our national street furniture network, having successfully won 3 major tenders to work with local authorities in Southampton, Solihull and the London borough, Haringey, to deliver new street furniture to these areas. In addition to these considerable wins, we continue to excel on the technology and creative fronts internationally. In Sweden, we are differentiating ourselves in the marketplace by winning numerous awards for the creative use of out-of-home media including winning the best innovation award from IAB, Europe's digital trade bureau.

The campaign was in partnership with the City of Stockholm to notify homeless people at the nearest emergency shelters when the temperatures drop to critical levels. This supported our efforts to open new doors and allows us to start new conversations in the buying chain, creating opportunities to secure a seat at the table with each advertiser in developing their campaigns. So as you see, we are executing at a high level globally across all facets of our strategic plan. As an independent company, we continue to tap into the energy, creativity and focus of our employees across the globe as they deliver every day for our client partners while seeking to fully capitalize on the investments and advances we are making in our technology, data analytics and creative capabilities, and these initiatives are reflected in our results. If you can please turn to slide 10, and I will now turn the call over to Brian for the financial review.

Brian D. Coleman -- Senior Vice President & Treasurer

Thank you, William. I, too, would like to welcome all of our stakeholders to our earnings conference call and echo the statement that we are optimistic about the future of Clear Channel Outdoor. With the strength of our management team and Board of Directors supported by our stakeholders, we believe we have a unique opportunity to benefit from the ongoing trends in the out-of-home industry. I will first review our second quarter results and then discuss the recent equity offering. As in the past, during our GAAP results discussion, I'll also talk about our results adjusting for foreign exchange. We believe this improves the comparability of our results to the prior year. I will refer to these results as adjusted revenues, adjusted expenses and adjusted OIBDAN. And you will be glad to know we are working on expanding our disclosure to provide additional insight to our stakeholders.

This quarter, we've added additional digital revenues for the Americas and International segments as well as the percentage of America's revenues attributed to national. Going forward, we will continue to review additional disclosures that may be helpful to investors. Our results reflect 2 very different stories. In the U.S., the team delivered exceptional growth. However, International results continue to be impacted by a challenging economic environment in China. Consolidated revenue decreased 2%. After adjusting for the impact from movements in foreign exchange rates, consolidated revenue increased 1.1%. The 1.1% increase in adjusted consolidated revenue is due to growth in our Americas segment, while International is impacted by the substantial decline in China. Consolidated operating income was $82.4 million, down 12.3% as compared to the prior year. Adjusted consolidated OIBDAN declined to 2.8% to $172 million with growth in the Americas offset by a decline in International, primarily due to China.

Moving on to slide 11, I will discuss Americas results. The Americas business had a very strong quarter with revenues up 9.1%. We are benefiting from the positive trends in the out-of-home industry in the U.S. with growth across all of our channels as well as the initiatives we have taken to capitalize on this growth, especially in our national business, which was up over 16% in the quarter. Within our national team, we've been working on a number of initiatives to drive growth. This includes expanding direct-to-client selling, increasing our speed in responding to RFPs, leveraging our sophisticated revenue management tools to optimize yield and, of course, continuing to expand our RADAR suite of solutions. Local continues its growth trajectory and was up about 5% in the quarter, due in part to the strength in digital. Digital revenue was $105.9 million, 32% of total revenues in the quarter and increased about 20% in total due primarily to the increase in both digital and both billboards and street furniture, benefiting from organic growth due to higher rates and new digital displays.

Airport displays, print billboards and wallscapes also contributed to the overall growth in revenue. And total operating expenses were up 7.5%. Direct expenses were up 4.3%, primarily due to higher variable site lease expenses related to higher revenue, and SG&A expenses were up 16% primarily due to higher employee compensation expense including variable incentive compensation. Operating income increased 15.8% to $91.1 million with OIBDAN up 11.4% with an improvement in margins due in large part to the strong revenue growth. Pacing for the third quarter was up 8.4% as of last week. The growth we have seen for the last several quarters is continuing with strength in all channels. On to slide 12 and our International results. Our International business had a challenging quarter. Reported revenues were down 10%, adjusting for foreign exchange revenue, declined 4.7% or $19.6 million. As we mentioned during our first quarter earnings call, our business in China has continued to decline, and in Europe, we are still feeling the effects from the nonrenewal of the bike contract in Barcelona and the conclusion of the airport contract in Rome.

Our subsidiary in China, Clear Media, was down $18.1 million in the quarter and has stated that a majority of customers from the 2 significant sectors, e-commerce and IT industries, have remained cautious with their spending given the uncertainties caused by the external environment and China's slower economic growth. However, in our 2 largest markets in Europe, France and the U.K., we continue to see positive momentum in revenues, especially in the U.K. with its expanded national digital network. Digital now accounts for close to 60% of revenues in the United Kingdom.

Total digital revenue was $90.1 million in the quarter, up 10% after adjusting for foreign exchange and accounted for 24.3% of total revenues. Excluding China, digital represented 30% of total revenue. Expenses were down 4.3% during the quarter and adjusted expenses were up 1.4%. Adjusted direct expenses were down 6.4% due to lower site leases expenses in Italy and Spain contributed to the nonrenewal of contracts partially offset by higher site lease expenses in countries experiencing revenue growth. Adjusted SG&A expenses increased 2.3% due to higher professional fees related to the investigation in China. It is disappointing to see the substantial decline in Clear Media's revenues and OIBDAN contribution. However, as you know, we own approximately 51% of Clear Media and we consolidated 100% of Clear Media's results under U.S. GAAP. Operating income for the International segment in the quarter was down 42.3% and adjusted OIBDAN was down 26.1%, due primarily to China.

International pacing for the third quarter of 2019 was down 4.6% including China as of last week. Europe's pacings are flat with continued strong growth in the U.K. primarily offset by Italy and Spain. Latin America is continuing to show growth with strength in Brazil. Before we go on to the rest of the slides, I'd like to take a few -- I'd like to make a few comments on CCIBV's results. For the second quarter, CCIBV's consolidated revenue totaled $290.4 million, a decrease of $20.5 million from the prior year. On an adjusted basis, CCIBV's revenues decreased $3.7 million during the quarter. CCIBV's operating income was $16.7 million in the second quarter compared to operating income of $17.5 million in the same quarter in 2018. Now please turn to slide 13. Capital expenditures totaled $79.3 million year-to-date through June 30. The increase in corporate capex is primarily related to the buildout of the new San Antonio office and IT infrastructure due to the separation. Our capital expenditures in our Americas segment were primarily for the conversion of digital billboards and the International segment for the deployment of street furniture in transit including digital displays.

Now on to slide 14. Clear Channel Outdoor's consolidated cash and equivalents totaled $372.5 million as of June 30, 2019. This balance includes $146.1 million of cash held outside the U.S. by our subsidiaries, a portion of which is held by non-wholly owned subsidiaries or is otherwise subject to certain restrictions and not readily accessible to us. In the second quarter, we received a net $115.8 million from iHeartMedia as part of the bankruptcy settlement and net $43.8 million from the sale of preferred shares. And we refinanced our senior subordinated notes in February, creating a maturity runway until December -- until 2022 with the exception of the CCIBV notes due in December of 2020. The weighted average cost of debt was 7.9% for the second quarter, and during the first half of the year, the cash interest payments were $161.2 million.

This is lower than the prior year due to the timing of interest payments. Our senior leverage ratio was 4.5x with consolidated leverage at 8.8x. We expect cash interest payments in 2019 to be approximately $322.2 million, and we anticipate having approximately $161 million of cash interest payments in the second half of 2019. In 2020, we expect cash interest payments to be $385.8 million. Moving to slide 15. As we've discussed, our new Board of Directors has made it a priority to address the capital structure including reducing leverage. Last week, we took the first step in the process of reducing leverage and normalizing the balance sheet with a public equity offering of our common stock. On July 25, we sold 100 million shares of our common stock for a public equity offering. We will use the net proceeds of the offering, together with cash on hand to redeem approximately $333.5 million aggregate principal amount of our 9.25% senior subordinated notes due 2024. In connection with the offering, we terminated our revolving line of credit with IR communications.

The proceeds from the offering will enable us to reduce our debt to $5 billion. And more importantly, it will reduce the consolidated leverage ratio by 0.6x to 8.2x based on our trailing 12-month results through June 30. And we expect to generate an incremental $30.8 million in free cash flow on an annualized basis due to the reduction in cash interest expense. In addition, they granted the underwriters a standard 30-day option to purchase up to 15 million additional shares of common stock on the same terms and conditions. If the underwriters exercised our option to purchase additional shares in full, we intend to use the net proceeds, together with cash on hand, to redeem an additional approximately $50.2 million of senior subordinated notes. You may have seen the announcement that we will be holding a bank meeting this afternoon to launch a $2 billion secured term loan B to refinance existing debt. Following the equity offering, this proposed refinancing marks another step the company is taking in normalizing its capital structure. We are excited to take these first steps in what we believe will be a sequence of steps to continue to delever, improve free cash flow and strengthen our strategic flexibility. That concludes my formal remarks.

Now let me turn the call back to William.

William Eccles -- Chief Executive Officer

Thank you, Brian. As I've said earlier, this is an exciting time for Clear Channel Outdoor now that we are an independent out-of-home advertising company. With our driven and dedicated team in place and the support of our new shareholders and Board of Directors, our team has the focus, energy and ambition to take the business to the next level. The fundamental strength of our industry combined with our strategic investments in digitization, automation and data analytics are delivering growth and supporting our positive long-term outlook. We welcome our new investors and look forward to updating you on our plan and ongoing progress.

And now, Scott Wells will join Brian and myself in taking your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Steven Hall [Phonetic] of Wells Fargo.

Steven Hall -- Wells Fargo -- Analyst

Thank you. So really strong growth in the Americas this quarter. I was wondering, if you could just help us dissect that a little bit. Is pricing a big tailwind in the market right now on tight capacity. Have you added any significant capacity that's helping you drive that? Is that the conversion to digital inventory? So any color there would be helpful. And then also, I think one of your European competitors won a U.S. contract, you've taken some share from them recently, including in Paris. So do you see them showing up a little more on the U.S. market as you continue to increase your market share in Europe? And then finally, really strong free cash flow in the quarter despite some elevated capex. So just how are you thinking about cash generation, maybe outside of the interest color that you've already given for the coming quarters?

Scott R. Wells -- Chief Executive Officer

Thanks, Steve. It's Scott here. And I'll start off with the first couple and hand to Brian on the free cash flow front. On the U.S. growth, we really saw growth across all channels and all product lines. So it was a really balanced growth quarter, we saw growth in national that you heard Brian referred to, and there was strong growth in local as well. From a category perspective, Business services, technology, insurance, Foods were the big growth categories and the big growth drivers, from a regional perspective. It was pretty balanced across the country, but strongest on the coasts. So it was a pretty balanced picture across.

We really didn't have any major new contracts. There were, of course, we have our steady digital conversion and so that gives us some strength but it was a growth story that really touched on all fronts, and we have seen some enhanced yields. We've definitely seen occupancy growing. So it's a bunch of -- a bunch of different drivers. I guess the other thing I'd just call out is we're seeing fruit from our direct-to-client outreach with some new clients coming in, they leverage their RADAR tools pretty effectively. So RADAR has been an important contributor and certainly programmatic, giving a new channel for people to transact electronically. So that's a -- I'll pause there and move on to the JCDecaux question in terms of the U.S. contract and just a clarifier, if we could. You're referring to the San Francisco contract that was just announced today?

Steven Hall -- Wells Fargo -- Analyst

I am, yes.

Scott R. Wells -- Chief Executive Officer

Yes, that was actually a renewal. So that's a contract that they've gotten, they've had for quite some time that they're getting the right to digitize it, I think is the main thing that's happening in the -- it's a renewal. They're active primarily in airports in the U.S., they do have presence in a few of the large markets. I don't particularly see it as something that is a new trend or anything along those lines. And that one was absolutely a renewal. Brian, you want to take the free cash flow?

Brian D. Coleman -- Senior Vice President & Treasurer

Yes. Look, I think the way to think about free cash flow is, there's a great deal of seasonality in the business. And so any quarter in isolation, it doesn't tell the full year story. I think in terms of what to think about going forward, you may see a little higher capex expense relating to some of the investments we're making in Europe and later in the year, you'll see Paris come online. So maybe a little bit higher than what you've seen historically, but it's for a good reason. We've got some great contacts that we've won and investments that we've made. But I think the biggest impact of free cash flow going forward is really the efforts that we're doing on the capital structure side.

You saw the equity issuance that we did, we're taking the net proceeds, and we're paying down some expensive subordinated debt, utilizing a 103 equity clause that we had previously negotiated. Now we have -- you can do the math, but now we have about a $30 million per annum impact that would be cash interest reduction, free cash flow generative. There's been an announcement about a bank meeting. And so it's in the marketplace that we're kind of doing the second phase of work. That refinancing will be anticipated to be at lower rates, and will also reduce cash interest expense. So I don't have the numbers for you there yet, and the full story is really not out there. But I think that's the way to think about free cash flow, where we are today and where we are going forward.

Steven Hall -- Wells Fargo -- Analyst

Great.

Operator

Thank you. Your next question comes from the line of Aaron Watts of Deutsche Bank.

Aaron Watts -- Deutsche Bank -- Analyst

Everyone, thanks for all the detail today. Brian, I know you talked about it in the pacing that Europe is facing flat as of last week. I apologize if I missed this, but how did Europe perform in the second quarter?

Brian D. Coleman -- Senior Vice President & Treasurer

So I think we probably say Europe was pretty much flat in Q2 as well. I mean, it's impacted by a couple of significant lost contracts, the Barcelona bikes, which we didn't renew and the Rome Airport contract, which went in-house into the airport, and those have some impact. But that disguises -- the overall figure for Europe disguises individual market performances, we run the business as a portfolio of markets across the region. We saw a very strong performance in the U.K. in the quarter. We saw a strong performance in Norway, in Finland in Sweden and France showing growth as well. So some good performance in some countries and as you'd expect, given the macro environment, Italy, weak, Spain suffering a little bit. And then good growth in the Latin American markets as well.

Aaron Watts -- Deutsche Bank -- Analyst

Okay, that's helpful. And Brian, one other question for you. I know last time we convened for your earnings call, you had given some initial thoughts on your stand-alone kind of costs going forward. Now that we're a few months removed from the separation. Can you maybe give us your updated thoughts on how you envision costs for Clear Channel Outdoor kind of going forward? And if it's in line with what you had commented on last time we spoke with you?

Brian D. Coleman -- Senior Vice President & Treasurer

Yes. I think it's generally in line. I think what you will find over the 9 months to 12 months post separation as we migrate from the TSA agreement that's in place, that there's going to be some volatility in corporate expense. An example would be, you just don't exit the TSA and then start day 1. You actually have to hire the people, train the people, have some processes run duplicatively. So I do think you'll see a bit of an increase in separation costs during this time period. I think the more relevant question that you may be getting too, is what's the run rate kind of after all these costs have been processed? And I'm still sticking to, we hope to be around the same place. So if you took the first quarter kind of corporate expense number that we're in the same Zip code, backing out all the kind of onetime things that occur, there will be pressure on that.

I think that there may be some ability to operate more efficiently in certain areas, and there's going to be other areas where, for example, you don't get the economies of scale that you got because iHeart was able to combine both companies and purchase things, services, different things more cheaply than we could. So we're still working through all that. In any case, I don't expect major changes in the run rate. And as soon as we are able to identify that is not the case, we would communicate it, but generally, I think we're in the same place as we were when we last spoke.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. Great. That is helpful. [Technical Issues] more in, and I appreciate the time. William, you talked about opportunistic expansion being one of the tenants of your kind of vision going forward. Can you just give us your latest thoughts on the M&A environment, maybe both in Europe and here in the U.S. and how you think about being kind of an acquirer of assets versus divesting some assets potentially? But more generally, even just how active do you think the environment will be for the industry for the next kind of 12 months?

Brian D. Coleman -- Senior Vice President & Treasurer

Yes. I mean, I'll give you my view overall for the industry, which is I think it will continue to be active across the globe. I mean, the sector -- the out-of-home sector, as I said in my introduction remarks, it's a very hot sector within advertising right now, and that tends to lead to opportunistic M&A. I think there is still opportunity for consolidation in pretty much every market that I look at around the world. So I would expect to see continuing activity, we've seen it in the U.S., we've seen it in Europe. We saw all of the activity in Australia last year. So yes, I think we would certainly expect that trend to continue. As for ourselves, I'm not going to make any specific observations about our plans. I mean, we will look at opportunistic M&A, we will look to tuck-in acquisitions where they make sense for us.

I don't think you should anticipate a massive acquisition spree in the next few months. That's not the plan at all. But for us, it's about winning the right contracts that enable us to increase the value of our existing assets in the markets where we have presence. And yes, we also will continue to review asset sales, if someone else values our assets more highly than we do then we will obviously pay attention to that and consider that. But to be very clear, we do not think it makes sense to sell off individual markets or individual countries that might devalue the remainder of our footprint and to be absolutely crystal clear, nothing is planned at this time. Does that give you enough of an answer?

Aaron Watts -- Deutsche Bank -- Analyst

Thank you. Okay great. That's helpful. Appreciate the time.

Operator

Thank you. Your next question comes from the line of Kannan Venkateshwar of Barclays.

Harsh Dev -- Barclays -- Analyst

Harsh Dev [Phonetic] on behalf of Kannan. I just have one question on International. The digital revenue growth rate seems to be a little slower than the U.S., are we -- is it mostly to do macro factors or is it due to something else going on in particular there? And then I have one follow-up on International around top line growth. Is it possible to get a breakdown of organic growth without Italy and Spain?

Brian D. Coleman -- Senior Vice President & Treasurer

Okay. So let me take those. I mean, on digital grade, if you back out FX it's around 10% growth. And it will vary quarter-by-quarter, depending upon which contracts have come on stream in that quarter. So I don't think it does reflect any particular macro trend. Some contracts that we win will have a high element of digital, such as the Madrid Street Furniture contract that we won a couple of years ago. But other big new contracts such as the Paris one that we mentioned, that is not a digital contract, that's a that scroller contract. So it just really depends on which new contracts we have and on the specific rollout plans within a quarter. So I think the short answer to your question is no, it doesn't reflect any slowdown in our ambition regarding digital. Your second question regarding the kind of the specifics of the contract losses in Spain and Italy. We don't break out individual contracts or individual country or market financials. So I'm afraid I can't give you any more detail on that.

Harsh Dev -- Barclays -- Analyst

Okay. Thank you.

Operator

Thank you.Our next question comes from the line of Marci Ryvicker of Wolfe Research.

Stephan Bisson -- Wolfe Research -- Analyst

Good morning. It's Stephan for Marci. Brian, you mentioned the equity offering with step one, I assume, kind of a term loan a step 2 to fixing the capital structure. What -- for the possibilities for step 3 and possibly 4?

Brian D. Coleman -- Senior Vice President & Treasurer

Yes. I think, first, I talk a little bit about the term loan launch, which is out there as kind of the debt side, just step 2 being addressing the debt. And I think that it's important that we take a look at all of our senior debt and look at a comprehensive refinancing. So the bank loan is the start of that. I think there's more to come. Your question really is, though, after that, what comes next? And look, I think the -- we've done a great start. We've issued equity, we put ourselves in a position to take advantage of opportunities in the high-yield marketplace, do some significant refinancing, dramatically increase our free cash flow by interest cash reduction, strengthened our strategic flexibility. So I think that puts us in a pretty good place.

And I think that will help with further steps that we can take to delever. Because ultimately, that's the goal here. The company, upon separation, had too much leverage, it was a goal of the board and senior management to reduce leverage, but there's still a significant amount of leverage even after we do this. The company upon separation, didn't have strong free cash flow. If we had operated a plan, which we expect to do, it still would have been a while before we generated free cash flow. These actions help accelerate that free cash flow generation and the ability to delever organically by 18 months to 2 years. So those are big steps.

But it does put us in a better strategic position. And what I mean by that is some of the other things that we look at, such as potential asset monetizations or M&A activity where we can go out and acquire tuck-in acquisitions or win contracts that are -- that provide a network effect and are accretive to the business. We're going to be front-footed now, we'll be better able to operate from a position of strength. I think, in cases, people saw us as a company that was separated from a bankrupt parent and had a weak balance sheet, and that will no longer be the case. And so I think we're better positioned. So without telegraphing what the next steps are beyond -- the refinancing is probably bigger than what we're seeing today. I will tell you that we are open, and we are looking, and we want to be aggressive operators of the business as long as it makes sense. And we think we're in a position to benefit from that.

Stephan Bisson -- Wolfe Research -- Analyst

Great. And then just one more. How should we think about the expenses for OpEx and capex regarding Paris?

Brian D. Coleman -- Senior Vice President & Treasurer

On specific contracts, we don't really talk about any of the details. The -- just, I think conventional wisdom, we tell you that this is a big new contract. There's a significant amount of capex that's involved. The timing of this is pretty much now as we're acquiring equipment and over the third and fourth quarter as we start putting plant into ground. So you will see some capex flow through the company in the latter half of the year. There's a little bit of a delay before you start monetizing that capex, but you should see the revenue benefit coming shortly thereafter. So in a general way, that's the sense of how I would think about it, the details we just don't provide on a contract by contract basis.

William Eccles -- Chief Executive Officer

And just to add to that, I mean, revenues will start to flow in Q4 of this year. And then it's 2020 that we'll see the full impact of that contract. And as I said in my remarks, it is a very significant contract for us, not just for the value that it gives us in the city of Paris, but the impact that it has on the rest of our assets in France, our ability to sell a national network to our advertisers across France is significantly improved by winning Paris. So I think that is probably true to say that, that contract was worth more to us than to any of our competitors because of the incremental value it gives to the rest of our assets.

Stephan Bisson -- Wolfe Research -- Analyst

Great, Thanks so much

Operator

Your next question comes from the line of Jason Bazinet of Citi.

Jason Bazinet -- citi -- Analyst

Just had a question for Mr. Coleman. Do you mind just going back to the equity raise last month and just walking through some of the alternatives you considered in terms of raising capital? And what were the sort of the pluses and minuses of going down the equity route that you went down that sort of caused you to reach that conclusion?

Brian D. Coleman -- Senior Vice President & Treasurer

Thanks, Jason. That's a question that not only do I get from investors, but one that I've been asking myself for 90 days because it's the exercise that we've gone through, and we've gone through with the board. And we did look at a lot of options. I think, on our last earnings call, we talk about the tool kit and we talked about equity is one of the levers that we have, asset monetization as being another lever addressing our capital structure or our debt and the financial markets as being another. So we look at all the different levers that we have, and really didn't want to -- and really couldn't rely on any one of them. There had to be a combination of these different levers to really address where we wanted to go. And again, if you focus on the priorities of reducing leverage, increasing/accelerating free cash flow and establishing some strategic flexibility, which we didn't feel like we had upon separation, the one solution that actually impacted and improved the other solutions was an equity issuance.

The 2 questions I get the most are, why did you issue equity first, and why didn't you issue a whole lot more? And the answer really is we wanted to issue enough equity to kind of unlock the benefit of the refinancing options being in a better position, being in a position where we got a ratings enhancement, being able to tap both the term loan market as well as the high-yield market potentially to help refinance at lower rates and push out our maturities. The equity offering did that. If we'd gone out and refinanced without it, we'd be much more restricted in a much worse position. We might have been able to do some refinancing, we might not have been able to. We might have been able to do it at current rates, but it wasn't -- it wouldn't have been as attractive had we not improved our financial position. I think the same thing goes with respect to asset monetization. The strategic flexibility we get by having a stronger balance sheet and not being in a position where we are a distressed seller can only help us as we begin to negotiate potential monetizations or contracts where we're building on the business.

And then within the equity option, itself, there were a combination of different things that we looked at, but again, if your focus is on deleveraging and increasing free cash flow, a lot of those other options didn't really provide that benefit. They weren't real equity or didn't get full equity credit. Or they got full equity credit, but they had a significant cash coupon tied to it. So in a long winded way at the end of the day, I think we felt that this was the appropriate amount of equity, it didn't fix the balance sheet, but it would have had to been a lot bigger to fix the balance sheet. But it was enough equity to start this kind of virtuous sequence of other things that we could do, and we'd be in a lot better position to do it, and it's the combination of those items that we feel ultimately put us on the right track to delever, delever organically because of the free cash flow we've generated and to be in a much stronger position from a strategic flexibility standpoint.

Jason Bazinet -- citi -- Analyst

That's helpful. And this may be in an appropriate follow-up, but is it reasonable to assume that the daisy chain that you're talking about is essentially issue equity, pay down debt, open up the credit markets, refi, lower interest and then come back to the equity market and sort of rinse and repeat?

Brian D. Coleman -- Senior Vice President & Treasurer

I would not come -- I would not say come back to the equity markets and rinse and repeat. We think we've got this process, once we go through it, we may have to see where we are, but I like where we are. I think that through the equity raise and the pay down of debt and the -- kind of the debt recapitalization, we're not going to be -- we're not going to be at -- or maybe the target or optimal leverage level, but we'll have a path to being there, and we won't really have to do anything else. So I would say that it's that sequence, that daisy chain as you put it, and then I think it's, all right, let's see where we are. But yes, I would not say that there's any plan or desire at this point to come back to the equity markets.

Jason Bazinet -- citi -- Analyst

Okay. Thank you.

Operator

Your next question comes from the line of Davis Hebert of Wells Fargo.

Brian D. Coleman -- Senior Vice President & Treasurer

Yes, I'm going to be real careful, I never say that there's a quote, I'm doing air quotes, "target out there" unless that target is lower. Leverage is something we need to work on, and this is the first step, and we'll need to continue to approach a more meaningful and balanced number. When I answered Jason's question, and I talked about, it gives us line of sight, really might my goal, I won't call it a target, but my goal is to have that downward sloping leverage profile where in the next 18 to 24 months you can see yourself getting to 6.5% and 6%. That's dependent on you being conscientious and taking your excess free cash flow and paying down debt. There may be opportunities to continue to invest in the business, and we'll have to balance those options versus a repayment of debt options, but those options grow the business, grow EBITDA.

So it's still -- it still could be a way to approach a more meaningful leverage target. And then I think once you actually get to that, then you have to reassess where you are. But the first step was being able to equip the company with the ability to reach that point. And that's what these actions are designed to do. And then you asked about ratings. I think it was important as we went through this process to get some ratings enhancement, particularly from S&P. We hope that the equity process in combination with some of the stuff we're doing on the debt side will resonate. It was one of our goals. Ultimately, where we want to be is probably still an open question, but we needed to get some enhancement to kind of kick this off, and maybe next quarter or the next, we'll have a better idea of where we want to be when we grow up. The first step was the first step, and that is to get into -- out of triple C land and into at least single B land.

Davis Hebert -- Wells Fargo -- Analyst

That's helpful. Thank you. And then one fundamental question. On China, it seems like this weakness has gotten worse. Should we expect some sort of turn in the corner that down the road? Or is this something we should be concerned about as being maybe an impaired asset? Just any thoughts there.

Brian D. Coleman -- Senior Vice President & Treasurer

Yes. I mean, I think it's a fair question. It's also a difficult question for me to answer because as you know it's a -- this is a joint venture, clearly, there's a public equated company in Hong Kong, and I don't want to pre-empt in any way the results announcement that they will be making in August later this month. They did it through a trading update a couple of days ago, which is publicly available, where they talked about the uncertainties around the external environment and a continued slowing in the market. I really don't want to make any kind of indication about what we think the second half will be. What I would say is that I do think that we are seeing here a significant macro impact, the China economy was undoubtedly overheating.

The China government took some pretty significant steps to slow things down. We've seen retail sales slowdown, the lowest growth in retail that we've seen in the last few years. We've seen GDP growth slow down, we've seen media spending overall in China declined 11% in Q1 of this year, the biggest drop that they've seen in China for 11 years. And we've seen the out-of-home market as a whole decline by 18% in China, which is also the biggest drop since the global crisis 11 years ago. So I think there is a macro issue here without a doubt, and we have been particularly hit by it because our sector of the out-of-home business, which is the traditional bus shelter business, is almost entirely a paper and vinyl business. It has virtually no digital.

We just have a small digital pilot in the city of Nanjing, and traditional outdoors being particularly badly hit. And then finally, we've been hit as we say in our statement, by the decline in big categories for us around technology and e-commerce. So I think we're seeing a cyclical issue, not a structural issue for the Clear Media business. But I don't really want to say more than that until the Clear Media announces its results later this month.

Davis Hebert -- Wells Fargo -- Analyst

Thanks. Great thank you.

Operator

Your next question comes from the line of Lance Vitanza of Cowen.

Lance Vitanza -- Cowen -- Analyst

Hi guys. I had a couple of follow-up questions and then I wanted to ask about the Paris contract. But first, so the follow-up on the refinancing at lower rates. Given your leverage profile, should we assume that any pre-tax interest savings you're able to generate would equal after tax interest savings?

Brian D. Coleman -- Senior Vice President & Treasurer

Any pre-tax interest savings that we get -- I'm sorry, run me by that again, I just want to try and make sure.

Lance Vitanza -- Cowen -- Analyst

Yes. So just given your high leverage, I'm wondering if we can assume that pre-tax interest savings from lowering the coupons on your debt would translate into -- would equal after tax interest savings. In other words, are you in the zone where you're really not getting any tax shield from the interest expense that you're paying?

Brian D. Coleman -- Senior Vice President & Treasurer

Yes.

Lance Vitanza -- Cowen -- Analyst

Okay. So then a follow-up question on U.S. growth. You mentioned at one point early on you did benefit from some new customers. And I'm just wondering if those new customers were new to out-of-home advertising or had been advertising with some of your peers and you sort of stole them? Could you comment on that?

Brian D. Coleman -- Senior Vice President & Treasurer

So I think about new customers in a couple of ways, Lance. First off, with our move into selling programmatically, we've enabled our inventory to be accessed by a bunch of customers who buy digital first. And some of those are customers who did out-of-home years ago and had gone away, and they've come back. Some of them are customers that are truly new to the category. From a direct client outreach, a lot of the activity in new customer development is with emerging growth companies and that's an area that we've had some really good success in. And we're definitely not poaching them from other out-of-home companies. I think when we bring these companies in our competitors benefit from it. We hope in the long run that we benefit as well as they bring new customers to the category. I think all of us benefit from growing the out-of-home buy.

Lance Vitanza -- Cowen -- Analyst

Great. And then just lastly for me on Paris. I just -- let me play devil's advocate here for a second. And this may be the wrong premise, but given its presence throughout Paris, I would have thought that Decaux would sort of had it -- would have had an advantage on bidding for that business. And that, therefore, presumably you bid down the expected IRR, so to speak on that business to a level that perhaps Decaux found unacceptable. And I'm wondering -- I understand, I mean, why would you -- what are the benefits to you? Are there tangible benefits beyond the value of that contract, whether it's being able to offer Paris on a national campaign throughout France? But just if -- anything you could help us -- that would help us draw a clear line to why that contract -- why you did what you did there?

Brian D. Coleman -- Senior Vice President & Treasurer

Yes, sure. Thanks, Lance. I think I touched on it in the answer to an earlier question, and I think you are pretty close to the answer when you talk about the ability to offer national campaigns. I mean, I certainly can't comment on our competitor's bidding strategy, that's entirely their issue and clearly they failed to retain the contracts, and we won it. So we are delighted by the win, we feel we bid at a very rational level for us, and as I said earlier, I think it is plausible to argue that the contract was worth more to us than to any of our competitors because of the impact it has on the rest of our inventory in France and the added value it gives to that inventory by giving us full national coverage and what we call the network effect. So I don't really want to go into our bidding strategy in any more detail than that. But I think you pretty much got your answer.

Lance Vitanza -- Cowen -- Analyst

Pretty much got your answer. Thanks. That's helpful.

Operator

We have time for 1 more question.

Brian D. Coleman -- Senior Vice President & Treasurer

One more.

Operator

Next question comes from the line of Jim Goss of Barrington Research.

Jim Goss -- Barrington Research -- Analyst

Thanks. I'm wondering, the enhancement to digital by RADAR is targeting in measurement capabilities, obviously, creates improved pricing power. I'm wondering if the benefits are immediate or should there be a general upward bias in your capabilities to secure dollars there and the overall impact on margins as this is affected.

Scott R. Wells -- Chief Executive Officer

Thanks, Jim. It's Scott here. I'll take that one. First and foremost, RADAR is relevant for all of our inventory. It's not just for digital inventory. It is an important part of our programmatic offering, which focuses on digital, but we do a lot of deals with RADAR using it against our traditional inventory. I would think of it as a tool in the toolkit to drive revenue growth, which revenue growth, we have good flow-through as we did increased revenue. It's probably the biggest tool we have for improving margins. And I wouldn't -- it'd be hard for me to put a margin enhancement number specific just to RADAR because it's part of several prongs that we're using to drive revenue growth. So I'm not sure I can answer that question for you in a dimensionalized way. But you should think of it as a critical part of us driving our top line, which then enables us to get the operating leverage that you've seen in our last few quarters' results.

Jim Goss -- Barrington Research -- Analyst

Okay. Fair enough. One other thing on capital allocation and the M&A in context. Given that you do want to bring down leverage. In order to trade up your properties, will it be necessary to sell certain assets in order to create room for additional M&A? Or is there enough flexibility within the overall M&A or within the overall capital allocation, where you feel you can use some of your free cash flow to make those acquisitions?

Scott R. Wells -- Chief Executive Officer

Well, Jim, part of the -- what we talked about, the issuing the equity, the refinancing of debt to the the creation or acceleration of free cash flow generation is to ensure that we're not in a position where we have to sell. That doesn't mean my asset monetization is off the table. I think we're very open to looking at opportunities, but again we don't want to be perceived as a company that is distressed and has to sell assets because that will be reflected in the prices that you are offered. And I've heard William say, I know I've said that we're open and if our assets are worth more to somebody else than they are to us, we'd be very open to entertaining discussions. But we also want to be in a position where we can operate our businesses, fund the growth of those businesses, and we think we can do a pretty good job at it. And so that's the work we're doing right now is to position the capital structure to match that strategic objective.

Brian D. Coleman -- Senior Vice President & Treasurer

Okay, we're going to end it there. I'd like to thank everyone very much indeed for joining us today. I just wanted to make a couple of closing remarks. First of all, clearly we have some challenges in China as a result of the issues in the macro that I talked about. I don't think we should allow those to overshadow the really exceptional performance that we've seen in the United States in the last quarter, and I congratulate Scott and the Outdoor Americas team on delivering those results. And I'd also end by thanking Brian and his team for their work on the balance sheet, which truly does increase optionality for the business at this very exciting time for Clear Channel Outdoor. So thank you very much to everybody for joining us. If you have any questions, please do direct them to Eileen, and we look forward to joining you next quarter. Thanks.

Jim Goss -- Barrington Research -- Analyst

Thanks very much.

Brian D. Coleman -- Senior Vice President & Treasurer

Thanks Jim.

Operator

[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

Eileen McLaughlin -- Vice President

William Eccles -- Chief Executive Officer

Brian D. Coleman -- Senior Vice President & Treasurer

Harsh Dev -- Barclays -- Analyst

Steven Hall -- Wells Fargo -- Analyst

Scott R. Wells -- Chief Executive Officer

Aaron Watts -- Deutsche Bank -- Analyst

Stephan Bisson -- Wolfe Research -- Analyst

Jason Bazinet -- citi -- Analyst

Davis Hebert -- Wells Fargo -- Analyst

Lance Vitanza -- Cowen -- Analyst

Jim Goss -- Barrington Research -- Analyst

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