Lamar Advertising Company

Excuse me, everyone. We now have Shane Riley and Jay Johnson in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of the company's presentation, we will open the floor for questions. To ask a question, please press star and 1 on your telephone keypad. In the course of the discussion, Lamar may make forward-looking statements regarding the company, including statements about its future, financial performance, strategic goals, plans and objectives, including with respect in the amount of timing of any distributions to stockholders and the impacts and effects of general economic conditions of the company's business, financial condition, and results of operations. All forward-looking statements involve risk, uncertainties, and contingencies, many of which are beyond Lamar's control and which may cause actual results to differ material from anticipated results. Lamar has identified important factors that can cause actual results in different material from those discussed in this call in the company's second quarter 2024 earnings release and in its most recent annual report on Form 10-K. Lamar refers you to those documents. Lamar's second quarter 2024 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, was furnished on the second on a form of 8K this morning and is available on the investor section of Lamar's website, www.lamar.com. And I'd like to turn the conference over to Mr. Riley. Mr. Riley, you may begin.

Thank you, Natalie. Good morning, all, and welcome to Lamar's Q2 2024 earnings call. The trends that we observed in Q1 held in Q2. Strong demand from local and regional advertisers more than offset softness in some national customers. allowing us to deliver solid, consolidated revenue growth. For the quarter, revenues increased 3.9% on an acquisition-adjusted basis, with growth across billboards, transit, logos, and particularly airports. Meanwhile, we managed expenses well, allowing us to increase EBITDA by 6.3% on an acquisition-adjusted basis, and to expand our adjusted EBITDA margin to 48%, a 100 basis point improvement over Q2 of 2020. Both the EBITDA growth and margin expansion led to AFFO per share growth of 9.5%. Because of that strong performance, management will be recommending to the board that our Q3 distribution be increased to $1.40 a share. As we look forward, we see more of the same, solid local and regional demand, with national still a bit of a drag. As we sit today, revenues are pacing up mid-single digits for the second half, with Q4 pacing slightly stronger than Q3. Also, if political comes in for Q4 as it has in the past, there should be some upside that is not yet reflected in our pacings. As it is, we continue to track to reach the top end of our previously provided guidance for full year AFFO per share. Back to Q2, strong categories included services, building and construction, and automotive, while healthcare and financial showed relative weakness. Political was a tailwind too, adding about 60 basis points to our growth. For the full year, we have 15 million on the books for political, about 10% ahead of 2022 and well ahead of 2020. Both years, when spending for the full year, was about 20 million. For the quarter, local sales were up nicely, increasing nearly 5%. Meanwhile, programmatic was red hot, up about 3.6 million versus the year earlier period to approximately 8.6 million. We have picked up some new customers in the programmatic category. like pharma and CPG, and we are also seeing demand from some existing advertisers, including the insurance category, which began to stabilize in the quarter. We expect the strength in programmatic to continue, though year-over-year growth is likely to be less due to tougher comps. As a reminder, all of our programmatic business is national, so the growth there helps offset broader national weakness. Overall, including programmatic, national was off about 2.5%. At this point, we anticipate another low single-digit decline in national in Q3. However, activity from national customers in the form of RFPs has been up recently, and we are hopeful that we will see that business turn as we head into 2025. Programmatic strength also helped buoy our digital platform, which grew 2.6% on a same-store basis in line with the increase in Q1. Rate was up, by the way, across the analog platform. It was a quiet quarter on the M&A front as we spent about $10 million on a handful of deals. For the full year, acquisition spending is likely to be around 40 to 50 million. We continue to think the M&A market will pick up as we turn the corner into 2025. As you saw, we paid off the term loan last week, which put our balance sheet, already the best in the industry, in even better shape. So we should be well positioned to participate if attractive assets hit the market. I will turn it over to Jay now to walk you through the particulars.

Thanks, Sean. Good morning, everyone, and thank you for joining us. We had a solid second quarter and are pleased with our results, which was slightly ahead of internal expectations on both revenue and adjusted EBITDA. Q2 marked the third consecutive quarter of near double-digit AFFO growth as short-term interest rates were more stable in the first half of 2024. We have also benefited from mid-single-digit growth on the top line during the first six months of the year. Our billboard regions all experienced revenue and EBITDA growth over the second quarter of last year. In addition, our airport business had another strong quarter, growing 21.7% following 20% revenue growth in Q1 as air traffic continues to set record levels. Acquisition adjusted operating expenses increased 1.9% in the second quarter, which was slightly better than anticipated and down from 4.4% in the first quarter. As you may recall, in 2023, we benefited from COVID-19 relief grants in our airport business that will not repeat this year and primarily impact the first and third quarters. Adjusted EBITDA for the quarter was $271.6 million compared to $253.9 million in 2023, which was an increase of 6.9%. On an acquisition-adjusted basis, adjusted EBITDA increased 6.3%. Adjusted EBITDA margin for the quarter remained strong at 48%, one of the strongest second quarters in recent history. And despite inflationary pressures over the last few years, the company's adjusted EBITDA margin remains well above pre-pandemic levels. Adjusted funds from operations totaled $213.5 million in the second quarter, compared to $194.4 million last year, an increase of 9.8%. Diluted AFFO per share increased 9.5% to $2.08 per share versus $1.90 in the second quarter of 2023. Local and regional sales grew for the 13th consecutive quarter, but softness in national sales continues to be a headwind to our overall revenue growth. Programmatic sales, however, outperformed again this quarter, growing 73% versus Q2 of 2023. In spite of the national backdrop, we're encouraged by the resilience of local and regional sales which accounted for approximately 79% of billboard revenue in the second quarter. On the capital expenditure front, total spend for the quarter was approximately $22.6 million, including $13.6 million of maintenance CapEx. For the first half of the year, CapEx totaled $52.1 million, with maintenance accounting for $24.5 million. Our CapEx outlook for the full year remains unchanged, and we anticipate total CapEx of $125 million with maintenance comprising $50 million. On July 31st, we repaid the company's $350 million term loan aid in full, retiring the debt with a draw on our revolving credit facility and cash on hand. We continue to maintain a well-laddered debt maturity schedule and, following repayment of the term loan, have no maturities until the $250 million AR securitization in July 2025. We plan to address the AR securitization maturity later this year are early in 2025, most likely through an extension of the existing facility. Once extended, our nearest maturity will be the $600 million term loan being 2027, with no bond maturities until 2028. Based on debt outstanding at quarter end, our weighted average interest rate was approximately 5%, with a weighted average debt maturity of 3.8 years. As defined under our credit facility, we ended the quarter with total leverage of 2.98 times net debt to EBITDA, which remains amongst the lowest in the history of the company. Our secured debt leverage was 0.94 times at quarter end, and we were comfortably in compliance with both our total debt incurrence and secured debt maintenance test against covenants of seven times and 4.5 times, respectively. Despite the sharp rise in interest rates over the past few years and based on current expectations, our interest coverage should end the year north of six times adjusted EBITDA to cash interest. While we do not have an interest coverage covenant in any of our debt agreements, we do monitor this important financial metric. Healthy interest coverage exemplifies the strength of our balance sheet and the company's ability to service its debt. Our liquidity and access to capital remain strong, as the company continues to enjoy access to both the debt and equity capital markets. At the end of the quarter, we had approximately $744 million in total liquidity, comprised of $78 million of cash on hand and $666 million available under our revolver. The AR securitization was fully drawn at the end of the quarter, a balance of $250 million. With repayment of the term loan aid, the company's liquidity was approximately $450 million as of July 31st. Subsequent to quarter end, we established a new $400 million ATM program. The new agreement replaces the prior program, which included the same dollar amount and expired in June. While we do not anticipate issuing under the program in the near term, we view maintaining an ATM program as part of our corporate finance strategy and key to preserving financial flexibility with respect to the company's capital needs. This morning, we affirmed our revised guidance, which was increased following first quarter results and based on our outlook for the balance of the year. We still expect an FFO range of $7.75 to $7.90 per share in 2024. Full-year interest in our guidance totals $166 million, which assumes short-term interest rates are unchanged for the remainder of the year. As I mentioned earlier, maintenance cap X is budgeted for $50 million, and cash taxes are projected to come in around $10 million. Finally, the company paid a cash dividend of $1.30 per share in each of the first and second quarters, and our recommendation to increase the distribution is subject to Board approval. The company's dividend policy has not changed, and based on current expectations, we may consider a special dividend at year-end to ensure we distribute 100% of our taxable income. Again, we are pleased with this quarter's performance, particularly our strong local and regional sales, as well as our performance in the airport business. We look forward to executing on our operating strategy during the second half of the year. I will now turn the call back over to Sean for closing remarks.