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Clear Channel Outdoor Holdings Inc (NYSE:CCO)
Q4 2019 Earnings Call
Feb 27, 2020, 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 2019 Fourth Quarter and Full year Earnings Conference Call for Clear Channel Outdoor Holdings, Inc. [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 of Investor Relations

Good morning, and thank you for joining Clear Channel Outdoor Holdings 2019 fourth quarter and full year 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., who will provide an overview of the fourth quarter and full year operating performances of Clear Channel Outdoor Holdings, Inc. for 2019. After an introduction and a review of our results, we'll open up the line for questions. And Scott Wells, Chief Executive Officer, Clear Channel Outdoor America, will participate in the Q&A portion of the call. 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 represents management's current beliefs.

There can be no assurance that management's expectations, beliefs or projections will be achieved or that the actual results will not differ from expectations. Please review the statements of risks contained in our earnings press releases and filings with the SEC. During today's call, we will provide certain performance 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 our earnings press release and the earnings conference call presentation, which can be found in the financial section of our website, www.investor.clearchannel.com. Additionally, when we reference our business in China, we're referring to our 51% investment in Clear Media Limited, a public company that trades on the Hong Kong Stock Exchange.

Please note that our earnings release and the 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, February 27, 2020, and may no longer be accurate at the time of replay.

With that, please turn to page three in the presentation, and I will now turn the call over to William.

William Eccleshare -- Worldwide Chief Executive Officer Clear

Thank you, Eileen. Good morning, everyone, and thank you so much for taking the time to join today's call. Now please turn to slide four in the investor presentation. As many of you know, 2019 was a transformative year for Clear Channel Outdoor, as we separated from iHeartMedia. In the 10 months since we separated and became an independent publicly traded company, we have strengthened Clear Channel's capital structure, delivered exceptionally strong results in our Americas division, which now accounts for about 70% of OIBDAN and delivered 7% revenue, 16% operating income, a 9% OIBDAN growth in 2019 and established a new path forward, which we believe will position the company for long-term success. These achievements could not have been accomplished without the contribution from our teams around the globe.

Through their unwavering dedication, talent and hard work, they've positioned us to achieve our vision. As a unique mass-reach global media platform that delivers our clients' messages across our distinctive portfolio of digital and printed displays, we've been able to capitalize on the expansion of the out-of-home industry, particularly in the U.S. as well as in some of our largest international markets. We believe the strength in these key markets is the result of the progress we have made on the four key pillars of our strategy: growing the out-of-home medium, technology leadership, customer focus and opportunistic expansion. Please turn to slide number five. And we have good reason to be optimistic about the out-of-home industry. Based on data from Magna in 2019, the U.S. out-of-home industry increased over 6%, the U.K. was up 8% and the global market grew 6%. And the industry outlook is strong as well. Magna believes out-of-home will continue growing faster than traditional media and digital out-of-home will grow faster than online advertising.

Globally, out-of-home is projected to grow at 4% CAGR from 2020 to 2024, and digital out-of-home is expected to grow 14%. In the U.S., Magna expects out-of-home to grow at a 3% CAGR, and digital out-of-home to grow 14% from 2020 to 2024. In addition, GroupM, the world's largest advertising media company expects global spending on outdoor advertising, excluding China and Japan, to grow faster than any other medium other than online advertising. GroupM expects outdoor ad spending in the U.S. to grow mid-single digits over the next five years, expanding its share of total ad spend. Please turn to slide six. Our strategy is, first and foremost, to grow out-of-home share of total media spend, by leading the technology-driven transformation of the medium and to grow our share of total out-of-home spending by leveraging our distinctive asset base. Our digital network is a dynamic medium, which enables our customers to engage in real time, tactical, contextual and flexible advertising.

And we believe digital display technology opens out-of-home to new advertisers, increases spend from brands that already advertise with us and enables yield maximization, and our results support this strategy. With our technology investments driving notable growth in 2019, digital, which accounts for about 1/3 of total revenues, excluding China, which has limited digital, was up 14%. Breaking that down a bit further. In the U.S., we have increased the number of digital billboards by 35 during the quarter and 92 over the course of 2019. We now have more than 1,400 digital billboards in the U.S., including street furniture displays. There are more than 1,700 digital displays. Digital revenue accounted for approximately 32% of our Americas revenue and was up 15% in 2019. In our international markets, we installed 792 new digital displays during the quarter and 2,103 over the course of 2019 for a total of more than 15,000. Digital revenue accounted for approximately 31% of total international revenue and was up 12% in 2019, excluding China.

Moving to slide seven on the Americas business. One of our strategic pillars, customer focus, remained a key differentiator for us within the U.S., not only in winning and renewing contracts but also as we build out our advertising technology platforms like CCO RADAR. As a reminder, CCO RADAR is a proprietary suite of solutions that efficiently leverages aggregated, anonymized, opt-in mobile data analytics to deliver highly targeted and memorable advertising campaigns. RADAR solution works with both our roadside digital and printed displays and are available today across our entire roadside footprint. RADAR has evolved over the last few years, and with the use of mobile analytics across the out-of-home industry growing, we are seeing increasing adoption of our industry leading solutions across the broad array of verticals and among new and existing national and local advertisers. Notably, even certain technology companies are utilizing RADAR.

For example, RADARSync, which offers brands the ability to seamlessly integrate and align their own data into the out-of-home planning process, enabled us to secure a recent out-of-home buy from a leading digital streaming service. By leveraging our RADAR solution to drive app downloads and awareness, this specific customer learned how out-of-home performs when compared to other digital and performance marketing channels. In the end, the campaign saw 50% of app downloads coming from devices solely exposed to out-of-home, meaning that on its own, out-of-home was able to drive measurable behavior in the digital world. In programmatic, we continue to see triple digit growth, although of a small base. Still in its early stages, but delivering real functionality and revenues, our programmatic platform enables marketers to buy our out-of-home inventory in audience-based packages, giving them the ability to manage their campaigns on a self-service basis.

We believe programmatic buying empowers our clients with a level of flexibility closest to online platforms among traditional media, and we intend to focus on further developing it. Of course, while technology remains central to our transformation, we continue to improve our printed business, which generated mid-single-digit growth in 2019. This includes our premier panels, which addresses advertisers growing demand for large-scale printed street level out-of-home media. As brands continue evaluating ways to better leverage a mixed media approach to drive results, we are positioning ourselves at the center of that discussion with tangible and impactful solutions with both our digital and printed inventory supported by our RADAR solutions. We also continue expanding the technology our airport authority partners can use to measure performance. In November, Clear Channel Airports launched an industry-first web app for fast financial and occupancy reporting with their U.S. airport media partners.

Now on to slide eight. Within our International business, we saw continued momentum in a variety of international markets, with opportunities to expand our digital offerings, both through winning contracts and continuing our digital rollout. In the U.K., we continue to benefit from the strength of our digital platform, which accounted for approximately 60% of revenue in 2019. Based on the most recent information, the out-of-home industry in the U.K. grew 8%, faster than traditional ad spending and is taking a bigger share of the ad dollars, driven in large part by the growth of digital out-of-home, which was up 15% in 2019. With our most recent win in the U.K., we will operate one of its biggest digital malls advertising networks with 700 screens across 57 leading U.K. malls. Winning this Hammerson contract will expand our malls live network with 223 full motion digital advertising screens across Hammerson's 12 flagship U.K. shopping malls, beginning in June 2020.

We also won contracts that will expand our digital presence in key cities in many of our international markets, including 24 digital screens in Zurich, Switzerland and 20 digital screens in Seville, Spain. And in Brazil, we won a 20-year street furniture contract in Porto Alegra, which will include 168 clocks, 50 of which are digital. As we continue to increase the number of digital screens in our International business, we've been able to use our expanded digital platform to transform our media proposition. Our digital strategy is more than building displays. It is part of a broader strategy that includes automating the sales process, developing tools to manage campaign performance, revenue management to optimize the yields from our assets and working with our partners and advertisers to leverage the use of digital screen capabilities in even more flexible and creative ways. We now have the ability to sell flexible campaign solution based on audience, enabling advertisers to deliver contextually relevant and targeted messages at the right time, in the right place, to the right audience, optimizing how our inventory is used.

The automation technology, which allows us to sell flexibly, continues to be developed across the European region. During the fourth quarter, we launched the first campaign for our new street furniture displays in the city of Paris. This is one of the largest contracts in Europe, and provides our French team with the opportunity to transform our business in France. The ability to expand our assets, enhances our strong national footprint, as well as giving advertisers a highly compelling premium position in Paris. We look forward to continuing working with the city of Paris, as we expand our footprint. Looking ahead, our top priorities within our International business are winning new contracts, expanding our digital capabilities to more effectively address consumer demand built on our expertise and to drive growth. Brian will go through the financials in more detail. But as he will discuss, the exceptional results we delivered as a result of our digital investments and execution, primarily in the Americas, has been offset by the impact of the continued weakness in China's consumer economy on Clear Media, with their revenues down 20% in 2019. As reported in Clear Media's trading update issued this morning, they expect coronavirus could further slow China's economic growth and negatively impact consumer advertising spend in 2020.

Now before handing the call over to Brian, I do want to update you on our global strategy and plans to improve our capital structure, which have been ongoing since we separated from iHeartMedia. As you may know, Clear Media has already disclosed that we have initiated a strategic review of our investment in China and our continuing discussions with a potential purchaser. As of today, no decision has been made, and no definitive agreement has been entered into. But in addition to that, to further improve our capital structure, pay down debt and unlock shareholder value, we will actively evaluate additional opportunities, including potential dispositions to the extent we have an opportunity to accelerate this path to value that fairly reflects the future value of a business or region. Our focus is on taking the necessary steps to delever our balance sheet, enhance our financial flexibility and invest in technology to drive growth in our higher-margin markets, particularly in United States.

Now I'd like to turn it over to Brian to discuss our fourth quarter and the full year 2019 results. Brian?

Brian Coleman -- Chief Financial Officer and Treasurer

Thank you, William, and good morning, everyone, and thank you for joining our call this morning. As William mentioned, it has certainly been an eventful and transformational year for the company, and we are excited about the future. We believe we are taking the right steps to strengthen our capital structure and provide strategic flexibility to deliver strong results, while continuing to invest in our business. And as William stated, we remain open to all options to strengthen our balance sheet, including possible dispositions, to the extent that any potential transaction fairly reflects the future value of the business or region. Moving on to the results on slide nine. 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. As I mentioned last quarter, this will be the last quarter we use OIBDAN. In 2020, we are transitioning to a new reporting metric replacing OIBDAN with adjusted EBITDA, as we believe this metric is more useful to the investment community. A full reconciliation of adjusted EBITDA for each quarter and the full year 2019 is available on slide 22 and 23 in the investor presentation for your reference. However, the difference between these two metrics is restructuring and other costs, which had been included in OIBDAN but are not included in adjusted EBITDA. As we have seen throughout the year, our excellent results in the Americas have been offset by a decline in International, due to the impact of the continued weakness in China's consumer economy on Clear Media Ltd's. revenue and OIBDAN. In the fourth quarter, consolidated revenue decreased slightly by 0.3% to $745 million.

Adjusting for foreign exchange, revenue was up 1%. The increase in adjusted revenue is due to continued strength in the U.S., offset by a decline in China's revenue. Consolidated operating income decreased 2.4% to $114 million in the quarter. Consolidated adjusted OIBDAN was up 1.1%, with growth in Americas offset by continued weakness in International, due to China. For the full year, consolidated revenue decreased 1.4% to $2.7 billion. Consolidated adjusted revenue increased 1.2%. Americas delivered an exceptional year, with 7% growth, which was offset by the decline in International, due to the weakness in China, which was down 20%. Consolidated operating income was up 0.4% to $253 million. Consolidated adjusted OIBDAN was up 0.7%, with over 9% growth in Americas, largely offset by China. Please turn to slide 10 for a review of the Americas results. In the fourth quarter, Americas delivered another strong performance with revenue of $345 million, an increase of 4.5%. The increase in the quarter was driven by digital, which was up 10.8% and accounted for 34% of total revenue, as a result of both new digital displays and organic growth. National was up 3.8%.

Local was up 4.9%, which is impressive given the performance delivered by most other traditional media companies. We believe our strength in local is due in large part to the Americas' team's ability to deliver value to the customer through enhanced service, faster posting cycles and more sophisticated revenue management tools. The team remains committed to strengthening relationships with our local advertisers to further promote a better understanding of the out-of-home medium and our other solutions. The combination of the changing media landscape, our innovative tools and customer-centric teams are fueling our momentum. Direct operating and SG&A expenses increased 4.1%, driven by higher site lease expense related to higher revenue and a slight increase in both employee compensation and property taxes. Operating income increased 7.7% to $107 million and OIBDAN increased 5% to $145 million.

Fourth quarter margins were up slightly, driven in large part by top line growth. In the second half of 2019, we met our revenue guidance range of mid- to high single digits growth in revenue and OIBDAN growth in the Americas, with revenue up 6.2% and OIBDAN up 7.6%. In the full year, Americas revenue was $1.3 billion, up 7%, driven by a 15% increase in digital revenues, which accounted for 30% of revenue. Digital saw more organic growth and new digital deployments. National, which accounted for 39% of revenue, was up just over 9% in the year, with local up 5.7%. Direct operating and SG&A expenses increased 5.7% as a result of higher site lease expenses, in part, driven by higher revenues and higher compensation expense. Operating income was up 16.3% to $347 million and OIBDAN increased 9.1% to $507 million. Margins were up about 70 basis points, due primarily to the increase in revenues.

Next, please turn to slide 11 for the International segment. As we mentioned, the weakness in the consumer economy in China has had a negative impact on Clear Media's results with the remaining markets in International up slightly. More specifically, revenue of $400 million was down 4.1% in the fourth quarter, with adjusted revenue down $7 million or 1.7%. Our adjusted revenue from China was down $14 million. Excluding China, adjusted revenue increased as a result of growth from new contracts in France and digital expansion in various markets, including the U.K. and was partially offset by the impact from the nonrenewal of certain contracts in several international markets. Digital, which accounted for 34% of revenues, excluding China, was up 11.8%. Adjusted expenses were basically flat. Operating income was down 20% to $47 million and adjusted OIBDA declined 8.8% to $85 million, due to China.

In the second half of the year, adjusted revenue was up 1.2% and achieved the guidance we set in August of low single-digit growth. However, we did not achieve our adjusted International OIBDAN guidance of low single digit. Adjusted OIBDAN was down 1.8%, which is lower than we expected, due to the $3.5 million increase in the reserve related to the Italy investigation. For the full year, International revenue of $1.4 billion was down 7.9% and adjusted revenue was down $51 million or 3.3%. Adjusted revenue was down due to the $54 million decline in adjusted revenue from China. Excluding China, adjusted revenue was up. The increase is attributed to revenue from digital display expansion in various markets, particularly the U.K. and new contracts in France. This was partially offset by the nonrenewal of certain contracts in several international markets. Digital revenue was up 12% and accounted for 31% of revenue, excluding China. Adjusted direct operating and SG&A expenses were flat. Operating income of $65 million was down 44% and adjusted OIBDAN of $212 million was down 19%, due to China. Turning to slide 12 to discuss capex.

Capital expenditures totaled $232 million in 2019, which is in line with our guidance of $225 million to $235 million. Our capital expenditures in our Americas segments of $83 million, mainly consisted of constructing and sustaining our billboards and other out-of-home advertising displays, including digital billboards. In our International segment, we spent $136 million constructing and sustaining our street furniture and other out-of-home advertising displays, including digital displays. As a reminder, our reported capex includes 100% of China's capex. Corporate capex of $14 million primarily relates to the build-out of the new San Antonio office and IT infrastructure, which is a result of the separation from iHeartMedia. Now onto slide 13. Clear Channel Outdoor's consolidated cash and cash equivalents totaled $399 million as of December 31, 2019.

This balance includes $111 million of cash held outside of 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. As we discussed earlier, this year, we successfully reduced our total debt from $5.3 billion to $5.1 billion, due to the net proceeds from the capital market transactions last summer. The weighted average cost of debt was 6.8% in 2019, down from the prior year due to the refinancings we completed in 2019. Cash interest payments were debt for the year with $321 million, this was lower than the prior year due to the timing of cash payments following the separation from iHeartMedia and the subsequent refinancing completed in the third quarter. Lastly, looking at slide 14, let me discuss our guidance for 2020. We expect Americas' revenue to grow mid-single digits and adjusted EBITDA to grow mid- to high single digits in 2020. This is on top of a very strong 2019. International revenue and adjusted EBITDA, excluding foreign exchange in China, is expected to grow low to mid-single digits. We are anticipating capital expenditures, excluding China, to be between $200 million and $210 million.

And cash interest payments are expected to be $347 million in 2020. Now before I turn the call back to William, I do want to comment on the planned change in our U.S. tax filing status. When we file our 2019 taxes later this year, we plan to make the election to be an operator of real property assets for purposes of federal income tax. This status was created in the Tax Cuts and Job Act passed in 2018. This code section will allow us to treat certain billboards as real property and all debt related to the real property assets is not subject to the interest expense deduction limitation. As a result of this planned election, we did not pay cash taxes in the U.S. in 2019, although we did have cash taxes of $25 million related to our International operations. In 2020, we expect a small amount of cash taxes in the U.S. as we look to strengthen our cash flow. This will be in addition to the cash taxes we will pay in our International operations.

And now let me turn the call back to William for his closing remarks.

William Eccleshare -- Worldwide Chief Executive Officer Clear

Thank you, Brian. I continue to be confident about 2020 and the long-term outlook for our company. As Brian stated, we anticipate our Americas segment will deliver mid-single-digit growth in revenue and mid- to high single-digit growth in adjusted EBITDA. That is growth on top of the 7% revenue and 9% OIBDAN growth that we delivered in 2019. We have a unique value proposition as a mass-reach medium and are confident in the fundamental strength and growth drivers in our industry and our ability to capitalize on them. We're focusing on driving continued revenue growth, by building out our technology capabilities through platforms like RADAR as well as our programmatic offering. Through our investments, we are continuing to improve audience insights and data solutions to unlock significant value as well as empowering clients with a level of flexibility closest to online platforms among traditional media.

At the same time, we continue to be opportunistic about chances to further strengthen our capital structure and reduce our net leverage. This may include potential dispositions, if these transactions provide us with greater financial flexibility to further invest in our higher-margin businesses, particularly in the U.S., as we are maintaining our disciplined approach to drive sustainable, profitable value for our shareholders. In short, we continue to recognize the inherent strength of out-of-home as a brand-building medium and are committed to executing our vision to deliver a leading platform in the industry. In 2020, we plan to continue transforming our business, and I look forward to providing regular updates regarding our progress.

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

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Kannan Venkateshwar of Barclays.

Dev -- Barclays -- Analyst

Guys this is Dev [Phonetic] here on behalf of Kannan. So one question for Will, and then I have a follow-up for Brian. So Will, can you help us compare and contrast the U.K. and the U.S. digital markets. We're just trying to understand from a longer-term perspective, is it possible for the U.S. digital penetration to be reaching something like the U.K.? Or are there any structural differences in that market that we should be thinking about?

William Eccleshare -- Worldwide Chief Executive Officer Clear

Well, there are both structural and format differences, I would say. And thanks for the question, Dev. I mean, I think the U.S. digital market is the large-format market, whereas in Europe, we are, generally speaking talking about a smaller format roadside digital, the two square meter signs. And the real difference in terms of penetration of screens is around permitting and availability of sites to convert to digital in the U.S. So they are they're structurally different in terms of the way the markets would operate. So I don't think you can directly compare them either the way in which the markets operate or indeed the format that we're operating.

Scott Wells -- Chief Executive Officer of Clear Channel Outdoor Americas

Could I add one thing on that, William?

William Eccleshare -- Worldwide Chief Executive Officer Clear

Yes.

Scott Wells -- Chief Executive Officer of Clear Channel Outdoor Americas

It's Scott here, Dev. William is exactly right on the regulatory aspect. But I think we have mentioned this on prior calls as well. We do have markets, individual markets within the U.S. that are north of 50% in terms of digital revenue. So the ability to get to those kind of levels, is certainly not something that's impossible here. The issue is one of the ability to get the permitting and the ability to convert the quantity of assets.

Dev -- Barclays -- Analyst

Okay. Got it. And then one for Brian. I think one thing which I'd like to understand is how much flexibility you have both in opex and capex in case the coronavirus spreads more broader and in the U.S. and Europe? And how should we think of the margin profile in that scenario?

Brian Coleman -- Chief Financial Officer and Treasurer

Well, look, we have a great deal of flexibility in capex. There's a certain amount that could be committed due to contract concessions that you won previously. But by and large, a significant percentage of the capex is discretionary. And so you can see us manage that. In fact, we excluded Clear Media's capex guidance just for that reason. I think in this current environment, they're going to be they're separate publicly traded company. I don't want to speak for their behalf, but they're obviously going to be very thoughtful about how they commit and deploy capex. We can do the same. opex, we manage that on an ongoing basis, and we have to be flexible. We have plans in place. As anticipated economic, macroeconomic changes occur, we need to be flexible, and we have some flexibility there. But particularly on capex, a great deal of discretion. The majority of our capex is discretionary. And so I think we can have both those levers and can pull them if we need to.

Dev -- Barclays -- Analyst

Alright.

Operator

Your next question comes from the line of Steven Cahall of Wells Fargo.

Steven Cahall -- Wells Fargo -- Analyst

Yeah, thank you. Maybe first, Scott, on the guidance. So let's just say EBITDA is kind of flat to up this year, you've got capex going down, I think your cash interest is maybe slightly up and cash taxes may be slightly up. Anything else we need to think about as we're bridging 2020 free cash flow from 2019?

Brian Coleman -- Chief Financial Officer and Treasurer

I'm going to interject just for a second because it may not have been clear. When we gave our capex guidance, we included we excluded China, Steven. So I think if you look at capex for the remaining business, the Americas and International, it's actually going up. And we do see an opportunity in the U.S. really to invest in the business. So I want to make sure you have the right base. It might not have been clear. But the guidance for capex this year excludes China.

Steven Cahall -- Wells Fargo -- Analyst

Got you. Okay. And then maybe that leads me to my second question. So but how should we think about the cash that's going into or coming out of China at the moment as that market is under a bit more pressure. Is Clear Media Limited sort of a ring-fenced entity? And how much flexibility do you have on that cash coming in and out of China?

Brian Coleman -- Chief Financial Officer and Treasurer

Well, you know, there hasn't been a lot of distributions from China over the past couple of years. When they were the historically, there had been, and they go through a budget cycle, and to the extent they've built up cash, they can make an annual dividend. And historically, I can remember a couple of occasions where cash had built up and they made a special dividend. But over the past couple of years, and certainly, given the more recent economic climate, they haven't made distributions to their shareholders, which is how we would receive cash out of China. You mentioned cash going into China, we don't fund China. China has its own separate public company. And while, again, I don't want to speak for them, they are looking at, I'm sure, their liquidity position, they have the same levers they can pull with respect to capex and opex. And I'm sure they are the management team there is thinking very carefully about the environment they're operating in.

Steven Cahall -- Wells Fargo -- Analyst

Great. And then last one. It seems like maybe your comments on potential divestitures or maybe, I don't know, a little mediar than what they've been in the past. It sounds like maybe the pipeline could potentially be a little more active. So any more color you can give there. And if we think about the transaction pipeline, is it a lot of potential smaller transactions? Are there potential for big transactions? Any color would be appreciated.

Scott Wells -- Chief Executive Officer of Clear Channel Outdoor Americas

Right. Well, first of all, I would say, I think your interpretation is a pretty fair one in terms of what you said at the start of that question. I don't want to get into any further detail in terms of which markets and whether there will be more and more large, once we have any news on that, you will be the first to know. But as I said, we are continuing to evaluate opportunities to support our growth in the high-margin businesses. I don't really want to say more than that at this point.

Steven Cahall -- Wells Fargo -- Analyst

Great, thank you.

Operator

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

Chris -- Cowen -- Analyst

Good morning. This is Chris [Phonetic] on for Lance. I have two on China and the tax status. You had just talked about distributions the capacity for distributions to and from China. And if you're not really funding Clear Media, then how are you thinking about the possibility, if at all, of losing a majority interest in that entity, if they were to seek third-party funding? Are they thinking about liquidity issues and the need for third-party funding? Are they thinking about months left of cash and how to meet those significant fixed-cost obligations? Anything you can speak to that effect would be helpful. And then on the tax status and the potential savings there, how let me back into this, how much interest were you not able to deduct before making this election? And what exactly would that save you if you already weren't paying cash taxes in the U.S.? Does it just increase your ability to accumulate NOLs from here? Is that it? That's all for me.

Brian Coleman -- Chief Financial Officer and Treasurer

Yes, I'll take two very different questions. I'll take the first one. And again, I'd like to reiterate, Clear Media is a separately publicly traded company on the Hong Kong Stock Exchange. They have a full management team, and I'm sure they're all over their liquidity risks. China has been a challenging environment. Their Board and management team is actively monitoring the situation. I previously mentioned, they have levers in their business, much like we have in ours with respect to capex and opex remediation. And I don't know that I can speak much more than that. Obviously, we're watching it, but that's their company. And I'm sure they are watching it very closely. The second question about taxes. I think the way I'll respond to that is the new tax law limited interest deductibility and for a highly levered company like ourselves, there was a significant amount of interest expense that we could not shelter our income with. What this election will do is enable us to lift the interest deduction cap on the amount of interest expense that we have that is ratably associated with the percentage of business we have is real property.

So our U.S. billboard plant, a significant percentage of our business, the interest expense related to that and this is a nontax person description, but this is what you get, is no longer capped. And as a result, whatever you modeled for cash taxes in the U.S. is 0. And so I think that this is a positive election for the company from a free cash flow perspective. And I think most people who had done their calculations and attributed cash taxes in the U.S. can take those out this year and then take all but a small amount out for next year. And that is a significant election, it will contribute to free cash flow, and it is something that we will benefit from for the next couple of years. Now obviously, it's a complicated formula. The amount of real property you have affects the formula. The amount of cash interest expense you have effects the formula. But for the next couple of years, we will be a beneficiary of this election.

Chris -- Cowen -- Analyst

That's helpful. Thank you.

Operator

Our next question comes from the line of Jim Goss of Barrington Research.

Jim Goss -- Barrington Research -- Analyst

Thanks. A couple more things on the guidance. You're indicating basically margin improvement in the United States but margins flat and a lower growth level internationally. Wondering within the international markets, are there certain markets within the International space that are driving the concern about lower margins? And then related to the FX challenge. Typically, the revenues and expenses have had sort of offsetting factors. So it hasn't really come, it sort of come out in the wash. But are there any comments you can make as to if the exchange rates stayed at current levels, what those impacts might be in your overall International business?

Brian Coleman -- Chief Financial Officer and Treasurer

Yes, I'll tell you what, I'll take a stab at the international margins, William may add some color, and then I'll come back to the FX question. On the International margins, I wouldn't assume, just because of the way we provide guidance that because the revenue and the adjusted EBITDA are in the same low to mid-single-digit ranges that there isn't margin or that there is margin depression there. You can be at one end of the spectrum and the other and still be in the same range. I expect that we'll continue to see margin improvement internationally. It just so happened on the Americas side, there was a break, and we could say revenues came in at one place and and you saw a margin improvement. But the way that we provide guidance, I don't think you can just default to, one has margin improvement and one doesn't. I think we will see positive margins in both business and continue to work to improve those margins. And William, I didn't know if you had a any info on like what countries maybe are driving that. Obviously, the Paris contract is driving that.

William Eccleshare -- Worldwide Chief Executive Officer Clear

Yes. I would just add, Jim, that we as you know, and we talked many times in the past, we run the International business, it's the portfolio of businesses operating in a number of markets and a number of continents. So the overall figure hikes, some pretty significant variations in performance. And we saw some very strong performances and margin improvements in some significant market toward the end of 2019 and into this year. So I called out, particularly the U.K., where we had an exceptional year in 2019 and a very strong finish strong performance in Spain, strong performance in Finland and Switzerland and others as well. So it is a varied picture across the portfolio.

Brian Coleman -- Chief Financial Officer and Treasurer

And then, Jim, on the FX question, I think it's probably worthwhile to kind of explain how we think about it. And that really isn't the translation risk on where Forex is moving on our balance sheet. It really is, to the extent that we have free cash flow in a foreign currency that we anticipate utilizing somewhere else in a different currency. And that's the real exposure that we look at. And to the extent we would hedge, we would hedge that exposure. But your question, I think, is where we operate, do we see FX headwinds. Look, if I could predict where FX rates were going, I'd probably be in a different job, making more money. I think that euro exposure is a significant amount of the exposure we have. So your view on euros could help guide you to what kind of headwinds we see. But again, our focus is on making sure we don't have exposure to cash flow, not balance sheet risk.

Jim Goss -- Barrington Research -- Analyst

Okay. Maybe one separate question. Is there an optimal balance between print and digital displays? You're increasing your digital exposure, but at some stage maybe print is still going to be more appropriate to certain applications. Or do you think that's not true and that everything eventually goes to digital displays?

Scott Wells -- Chief Executive Officer of Clear Channel Outdoor Americas

Jim, it's Scott here. I'll take a crack at that and give the other guys a chance to chip in. We think print is a very important part of our business. And we think that there is absolutely a balance. The earlier question where I was referring to some of our markets have gone to more than 50% digital revenue, we still have very meaningful print positions, and there are definitely advertisers that prefer that format. They like to "own a location." So I think that you're going to see us working to optimize across those two and that, that will be sort of a perpetual feature of the business over the next bunch of years. I don't see print being something that we would be looking to take a step back because customers do value it.

William Eccleshare -- Worldwide Chief Executive Officer Clear

Yes, I'd absolutely echo that. I mean across our global footprint, print is absolutely at the heart of our business. It represents in the sense the core values of out-of-home is being a mass-reach medium digital ad value in some cases. But we certainly don't see us becoming a 100% digital business.

Jim Goss -- Barrington Research -- Analyst

Okay, thank you.

Operator

Your next question comes from the line of Stephan Bisson of Wolfe Research.

Stephan Bisson -- Wolfe Research -- Analyst

Good morning. First, behind the strong Americas guide, are you guys seeing really any kind of dichotomy in performance of markets or larger markets doing better than smaller markets as local ahead of national? And are there any categories that are particularly strong?

Scott Wells -- Chief Executive Officer of Clear Channel Outdoor Americas

So from a guidance perspective, we are looking at our channels, we're looking at our product lines, and we're looking at our geography trends. I think what we have been seeing over the last 18 months has been strength across the channels. So airports, national and local are all seeing good strength. We've seen strength across both printed and digital. And as we've looked at guidance, we have to take into account supply demand balance and things along those lines as we're looking downstream. But there's not a particular category or a particular product line that's coming into play. Certainly, our anticipated digital conversion, is something that we take into account. And we're expecting our level of conversion in the States to be the same or maybe a little bit higher than it was in 2019.

But there's not any one particular thing that's driving the business. The key to having the business perform well and you saw it in our 2019 results, we talked a lot about our digital conversions and the things we were doing with data, but we also talked about what we did with premier panels and converting that. And so innovation and across the whole product line is important to keep the customers engaged. And what we're looking at is we guide is the combination of what we're able to see in terms of deals that we've already done, what we know we're going to do in terms of product innovation and capacity, and what we believe in terms of how the market is going to develop over the course of the year. Hopefully, that sheds some light for you.

Stephan Bisson -- Wolfe Research -- Analyst

It does. And then would it be fair to assume that most of the revenue growth is driven by pricing rather than occupancy?

Scott Wells -- Chief Executive Officer of Clear Channel Outdoor Americas

I wouldn't say that, that's fair to assume. We do focus on yield, particularly if the business becomes more digital, and we were 34% digital in Q4. The concept of yield is a more driving concept than focusing just on price or just on occupancy because you can do different things with the product. So as I look back at 2019 and really the last couple of years, it's been a balanced growth driver that we've had because we've seen both occupancy and our achieved rates go up. And frankly, we don't really focus on that. We focus on the yield aspect.

Stephan Bisson -- Wolfe Research -- Analyst

You gotta thank you so much.

Operator

[Operator Instructions] Your next question comes from the line of Alexia Quadrani of JP Morgan.

Anna Lizzul -- JP Morgan -- Analyst

Hi, This is Anna Lizzul on for Alexia. Just building upon the previous question, did you see any strengths or weaknesses in any particular verticals such as technology, retail, financial services or any others?

Brian Coleman -- Chief Financial Officer and Treasurer

So are you asking for 2019 or you asking as we sort of look at 2020 ahead?

Anna Lizzul -- JP Morgan -- Analyst

For 2019, particularly in the Americas business?

Brian Coleman -- Chief Financial Officer and Treasurer

Okay. So in 2019, our biggest category growth was in insurance. That was a very strong category. Technology was a very strong category. Business services performed well. Food and food products performed well. Entertainment was a good category for us. So those are the ones that we're leading. And I'm sure your related question would be, what were the ones that we're lagging. And the ones that were most challenged in 2019 were travel and transportation, telecom and beverages. Beyond that, it starts to get pretty small. It was a pretty strong year across all the categories and our growers greatly exceeded our shrinkers, which was obviously key in delivering the results.

Anna Lizzul -- JP Morgan -- Analyst

Great. And just as a follow-up, what impact have you seen so far from the coronavirus across your business segments? And does your guidance incorporate any potential hit to the results? And what gives you confidence in the full year outlook?

William Eccleshare -- Worldwide Chief Executive Officer Clear

So I think on coronavirus, the truth is, this is rapidly evolving situation, and we're obviously monitoring it very closely. We're particularly concerned about any of our people who might be infected, both in China and elsewhere. It is moving very quickly, I would say. And we have so far as we announced this morning from China, we've certainly seen an impact on the China business in the first quarter. We have seen some limited instances of it having an impact in a small number of the European markets to date. But it's really, I think, way too early to try to evaluate what the impact would be across the full year.

Operator

At this time, there are no further questions. I will now turn the call to management for any closing comments.

Brian Coleman -- Chief Financial Officer and Treasurer

Thank you. I want to ask the question that wasn't asked, and that is how do you intend to attack your leverage profile. And I want to talk about that a minute. First and foremost, fundamentals, we want to grow the business, we want to manage cost effectively. And by that, I mean, we're going to continue to invest in the high-margin operations, particularly in the U.S. We have opportunities for opportunistic refinancings. The term loan B market is attractive. But primarily, I'm referring to the opportunity in February of next year to refinance our expenses 9.25% notes. If the market environment that we have today holds until then, that's a significant amount of savings that we can achieve and grow free cash flow. You've seen effective tax planning strategies, we're implementing that. That also increases free cash flow. And as William mentioned, and as I kind of weighed in on as well, the potential for accretive dispositions, it is something that we are considering as long as we get fair value for whatever it is that we're looking at. So in closing, I wanted to kind of point that out, and William, I'll turn it over for you if you have any remarks.

William Eccleshare -- Worldwide Chief Executive Officer Clear

Thank you, Brian, for underlying those really important points that I think we have made it very clear the direction we're moving in. I think we've given very clear sense of the huge momentum that we have in the business, particularly in United States, and really appreciate everybody joining the call and your interest in the company, and we look forward to updating you through the year. Thank you very much, and good morning.

Operator

[Operator Closing Remarks].

Duration: 54 minutes

Call participants:

Eileen McLaughlin -- Vice President of Investor Relations

William Eccleshare -- Worldwide Chief Executive Officer Clear

Brian Coleman -- Chief Financial Officer and Treasurer

Scott Wells -- Chief Executive Officer of Clear Channel Outdoor Americas

Dev -- Barclays -- Analyst

Steven Cahall -- Wells Fargo -- Analyst

Chris -- Cowen -- Analyst

Jim Goss -- Barrington Research -- Analyst

Stephan Bisson -- Wolfe Research -- Analyst

Anna Lizzul -- JP Morgan -- Analyst

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