Lamar Advertising Company

Excuse me everyone, we now have Sean Reilly 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 the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. In the course of this 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 to the amount and timing of any distributions to stockholders and the impacts and effects of general economic conditions, including inflationary pressures on the company's business, financial condition, and results of operations. All forward-looking statements involve risks, uncertainties, and contingencies, many of which are beyond Lamar's control and which may cause actual results to differ materially from anticipated results. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call in the company's first quarter 2025 earnings release and its most recent annual report on Form 10-K. Lamar refers you to those documents. Lamar's first quarter 2025 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, was furnished to the SEC on a Form 8-K this morning and is available on the Investor section of Lamar's website, .lamar.com. I would now like to turn the conference over to Sean Riley. Mr. Riley, you may begin.

Thank you, Raissa. Good morning all and welcome to Lamar's Q1 2025 earnings call. In the first quarter, we delivered our 16th consecutive quarter of acquisition adjusted revenue growth with an increase of 1.1%. Both local and programmatic revenue were higher while national was slightly down year over year. Recall that Q1 2024 had an extra day of revenue due to leap year and the 2024 Super Bowl was in Las Vegas, our largest airport market and one of our largest billboard markets. With those headwinds in mind, revenue growth for Q1 2025 came in about as we had anticipated. As noted in the release, we are still pacing to reach our previously provided guidance for full year AFFO per share. We are obviously keeping a close eye on the broader economy, but out of home has historically proven to be a resilient medium in times of uncertainty and we are not seeing any cancellations or hearing anything from local or national customers that suggest we're headed for trouble. To the contrary, I just returned from our industry confidence in Boston and our larger agency customers are telling us that it is steady as she goes. Okay, back to Q1, categories of strength included services, retail, construction, and oil and gas while gaming, restaurants, and amusements showed relative weakness. Local regional sales were up about 1% while national was down slightly as mentioned. Programmatic was again a bright spot with year over year increases of about $2 million which translated into nearly 30% growth. Overall, digital billboard revenue was up 4% and accounted for approximately 30% of our billboard revenue. On a same board basis, digital was slightly up. On the M&A front, we have been busy. In Q1, we closed 10 deals for about $22 million. We have since closed several more including the acquisition of a nice portfolio with a good digital footprint in the Northeast last week. Our -to-date spend is now north of $70 million and based on our pipeline, I'm confident that we will exceed the $150 million in spend that we projected in February. Finally, as you saw in the release, we have repurchased $150 million of our stock at an average price a little over $108. This effort began in March and concluded through a 10B51 program in April. Our decision to do this is evidence of our conviction that out of home has never been stronger and that at Lamar, we are particularly well positioned from a product, market portfolio and balance sheet perspective to build on our industry leadership status. With that, I will turn it over to Jay to walk through the numbers.

Jay? Thanks, Sean. Good morning, everyone, and thank you for joining us. Our first quarter results exceeded internal expectations across revenue, adjusted EBITDA, and AFFO. Growth in AFFO continued in the first quarter, which was nice to see given AFFO grew almost 10% in Q1 a year ago. Acquisition adjusted revenue increased .1% from the same period last year following a very strong first quarter in 2024 when pro forma revenue growth came in north of 5%. Our billboard regions experienced low single digit top line growth with the exception of the Southwest, which was essentially flat year over year. The company's airport and logos divisions outpaced the broader portfolio, growing revenue .8% and .3% respectively. Acquisition adjusted condolinated expenses increased .6% in the first quarter, which was slightly better than anticipated and should be in the 3% range for the full year. Adjusted EBITDA was $210.2 million compared to $211.9 million in 2024, declining 80 basis points in the quarter. Adjusted EBITDA decreased 1% on an acquisition adjusted basis, while adjusted EBITDA margin remained strong at approximately 41.6%. Adjusted funds from operations totaled $164.3 million in the first quarter compared to $158.2 million last year, an increase of 3.8%. Deluded AFFO per share grew .9% to $1.60 per share versus $1.54 in the first quarter of 2024. Local and regional sales accounted for approximately 82% of billboard revenue in Q1, growing for the 16th consecutive quarter. Q1 of 2021, a COVID-impacted quarter, was the last in which we saw a year over year decline in local and regional sales. This consistent performance exhibits the resilience of our core local advertising business and differentiates the company from our peer group. On the capital expenditure front, total spend for the quarter was $29.9 million, including $9.4 million of maintenance capex. And for the full year, we anticipate total capex of approximately $195 million, with maintenance comprising $60 million. Moving to our balance sheet, we have a well-ladder debt maturity schedule with no maturities until the term loan be in February 2027, followed by the company's AR securitization later that year in October. At quarter end, we had approximately $3.2 billion in total consolidated debt, and a weighted average interest rate was 4.6%, with a weighted average debt maturity of 3.6 years. We ended the quarter with total leverage of 2.85 times net debt to EBITDA, as defined on our credit facility, which remains amongst the lowest level ever for the company. Our secured debt leverage was 0.83 times, and we're comfortably in compliance with both our total debt and currents and secured debt maintenance test against covenants of 7 times and 4.5 times, respectively. For the full year, we expect total leverage at or below 3 times, with secured leverage consistent as well at or below 1 times net debt to EBITDA. Our LTM interest coverage through March 31st was 6.6 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. The healthy coverage exemplifies the strength of our balance sheet and the ability to service our debt. As a result of the focus on our balance sheet, the company is well positioned, and we have resumed our normal acquisition activity, with an investment capacity well over $1 billion. In addition, we have the ability to deploy this capital while remaining at or below the our target leverage range of 3.5 to 4 times net debt to EBITDA. Our liquidity and access to capital remain strong as the company continues to enjoy access to both the debt and equity capital markets. As of March 31st, we had just over $490 million in total liquidity, comprised of $36.1 million of cash on hand and $455 million available under our revolving credit facility. We ended the quarter with $286 million outstanding on the revolver and $223.5 million strong on the company's AR securitization. As Sean mentioned, we began taking advantage of dislocation in the capital markets during March with repurchases of our Class A common stock and continued into April. To date, we have repurchased 1.39 million shares at approximately $108 per share. The repurchases are accretive to AFFO, with returns well in excess of the company's cost of capital. We have $100 million remaining under the share repurchase program, but plan to seek board approval to increase that authorization back to its historical $250 million level. In this morning's release, we affirmed our full-year AFFO guidance of $8.13 to $8.28 per share. Cash interest in our guidance totals $152 million and assumes SOFR remains flat for the balance of the year. As I touched on earlier, maintenance capex is budgeted for $60 million and cash taxes are projected to come in around $10 million, which excludes any taxes related to disposition of our interest in VISTA media earlier this year. And finally, our dividend. We paid a cash dividend of $1.55 per share in the first quarter. Management's recommendation at the upcoming board meeting will be to declare a cash dividend of $1.55 per share for the second quarter as well. This recommendation is subject to board approval, and we will communicate the board's decision following the board of directors meeting later this month. The company's dividend policy remains to distribute 100% of our taxable income, and for the full year, we still expect to distribute a regular dividend of at least $6.20 per share, excluding any required distribution resulting from the VISTA sale. Again, we are pleased with our financial position and strong balance sheet, which should help mitigate any uncertainty that could arise in the broader economic environment. I will now turn the call back over to Sean.

Thank you, Jay. I will cover some familiar earnings metrics and then open it up for questions. In terms of relative regional strength and weakness, our central and Midwest regions showed relative strength in Q1, while our southwest region, which of course includes Las Vegas, and our Gulf Coast regions showed relative weakness. As I already mentioned, programmatic grew almost 30% in Q1, and it continues to perform well as we move into Q2. Digital overall also continues to perform well as we move through Q2. In terms of sales mix for Q1, 82% was local regional, while 18% was national programmatic. I mentioned categories of relative strength. Those included services, which was up 11% in Q1, retail up 6%, building and construction up 15%. Categories of relative weakness included restaurants down 4% and gaming down 9%. With that, let's open it up for questions.

At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, to ask a question, that is star and 1. We'll take our first question from Cameron McVeigh with Morgan Stanley. Your line is open.

Hey, good morning.

Hey, Cameron.

I wanted to ask if you're still expecting the 3% organic revenue growth for the year, and maybe how you would expect the quarter's trend based off your current visibility. And then secondly, in your view, Sean, what do you think is causing the national softness this quarter, or was that all comp-related? Thanks.

So, just a little color on our pastings and where we are today relative to that goal that you mentioned of being up approximately 3% or, you know, let's call it the midpoint of the range-ish. Right now, we are 75% booked to that goal as we sit today, so the visibility is pretty good. It's not perfect, but I'd say that's pretty good. That's pretty much on par with where we would be every year about this time. You know, the national weakness is, you know, it's been with us for a little bit. Fortunately, as programmatic grows, which is a national piece of our book, it kind of makes up for some of that national weakness. You've heard me say it before. Some of it's just some large customers that have changed their buying habits. You know, I've pointed out insurance. As I mentioned in my comments, the conference we had in Boston was actually very bullish, and I came away from it feeling better about how national was going to perform as we move through the year.

Got it. Thank you.

Our next question comes from Jason Bassinet with Citi. Your line is open.

Thanks. I guess I can't think of too many times in the past where investors are quite convinced we're going to go into economic slowdown, and every company that reports, including yours, indicates that there is no weakness going on. So my question is, this period of time, can you draw any analogies to what this feels like in terms of the disconnect between investors and what you're seeing on the ground? And if investors are indeed right, what's the early sort of indicator that you get? Is it cancellations or is it more nuanced than that?

Thanks. Yeah, you know, I think you've heard me say this before. Typically, it's our shorter cycle sale that could be the canary in the coal mine, so we look at how digital, which is our shorter cycle sale, is performing, how it's performing relative to the overall footprint. And you know, the news there is solid, so that gives us some confidence as we sit today. You know, there was a moment in time in, I guess it was, I can't remember whether it was 24th or 23rd, where everybody, I can't remember when we were last together and we were talking about recession, recession. And you know, the questions I was getting was, well, how do your verticals, how do they perform when you go into a recession? And of course, you know, I'm still getting those questions. Now they're more like, how do your verticals perform when you have a tariff war, which I've never been through a tariff war. But you know, right now, again, it's all I can say is it's basically steady as she goes.

That's great. Can I ask one follow-up question?

Sure, sure.

Maybe I'm wrong about this, but I feel like the sort of legal vertical has become far more prominent today than it was in the past. Is that a fair characterization?

Yeah, absolutely. So we break it out as services. And that category is approximately 20% of our book. And legal services makes up approximately 50% of that. So legal services have grown to, you know, give or take 10% of our book. You know, they're very, I'll say this about our lawyer friends. They are very savvy in the way they use our medium. They're very good at it. They're very good at buying in the right places and buying in bulk. They keep their presence up all year. And it's working for them.

That's great. Thank you

for the call. Yeah.

Our next question comes from David Karnosky with JP Morgan. Your line is open.

Hi, thanks. Sean, you know, you're busy on the M&A front. I just wanted to see if you could kind of dig into the landscape a bit, you know, what type of deals are available at the moment. And I don't know if you can frame how to think about the inorganic contribution to revenue growth should you execute on that. Full 150. And then can you just update us on the expectation for expense growth for the year? I think last time you framed it around 3%. Thanks.

Yeah, so we're still pacing around that 3% expense growth, right, Jack? Yep, correct. Pretty much there. You know, I think we're going to be well north of 200 million in acquisition activity by the time we close out this year. We've got one that, you know, I can't mention on the phone call right now, but we're really excited about over here. So, yeah, it's going to be a good contributor. And, you know, I think we'll be able to give you more color on the inorganic contribution in August.

Great.

Yep.

Thanks. Our next question comes from Daniel Osley with Wells Fargo. Your line is open.

Thanks. Good morning. So following up on your commentary on national, you know, what are some of the ways that you can address the continued weakness there outside of general programmatic growth? And then how do we think about the pace of digital conversion throughout the remainder of the year?

On the digital conversion question, we're still pacing to meet our goals, something north of 350 deployments. You know, national has been a bit of a quandary for us. You know, it's, we have sometimes big customers. There can be a turnover in a CMO and they want to make a change. And so they'll pull out their out of home spend and maybe go to digital. But, you know, it works the other way, too. You know, for example, I had a great visit with the CMO of Cracker Barrel at the Boston Conference. And they seem to have successfully turned the corner on their business and are telling us that they're going to plus up a little bit on their buy. So you know, it can ebb and flow, as you've probably heard me say many times. The local dollar tends to be very steady and the national dollar tends to be a little more fickle. But at the end of the day, it's been my experience that if you smooth out the cycles, they grow at roughly the same pace.

Thank you.

And as a reminder, if you would like to ask a question that is star and one to join the queue, we'll take our next question from Jonathan Navrit with TD Cowan. Your line is open.

Hey, good morning. Hey, Jonathan. So you kept your 2025 AFFO per share guidance unchanged despite purchasing approximately 1.4 million shares through April. Does

this imply

that your absolute AFFO dollar expectations have declined or is there another offset that I'm not considering?

You got a little garbled on the last part of that question, but I'll let Jay hit the AFFO per share.

Good morning, Jonathan. You know, we repurchased those shares late in the quarter. And just from a conservative perspective, we haven't included that in the full year guide. So we still anticipate that even outside of those share repurchases that we would be affirming AFFO guidance.

Okay. All right. Thanks. The second one is, you know, although revenue increased -over-year, even though it dipped slightly, can you provide any additional color on the primary drivers of this expense growth during the quarter and specify if there were any notable one-time items that we should model going forward?

Yeah, I'll let Jay hit that one as well.

But

keep

in mind, we are going through an enterprise conversion that has elevated expenses here at corporate. But, Jay, you want to hit that? And

there were a couple of things, Jonathan, that were what I would call sort of one-time. On the sales commission front, we ran a sales contest to kind of make up for some of the headwinds in Q1, so that was kind of elevated. Health insurance continues to be an elevated cost, and I think you're hearing that from most corporates. And then we had some one-time expenses that came through in Q1 in a couple of our outdoor regions that we don't expect to continue going forward. We did beat our expectations in Q1, and again, for the full year, we still anticipate acquisition-adjusted consolidated expenses to come in around 3% as budgeted. Got it.

And just on my last one, so we have some detail on the premier outdoor asset acquisition. Could you give us some more color on the asset profiles of the 10 acquisitions that you did during the first quarter? Thank you.

Sure. It's the same old fill-in activity that you're familiar with. These are very predictable acquisitions. They're not large in and of themselves, but they add up to be quite accretive as we move through the year. I like to characterize them as high-quality, re-qualified assets that are within our existing footprint. Jonathan, you still there? Yes, yes, I am. Thank you for the response, Paul. Yep.

It appears we have no further questions at this time. I'll turn the program back to Sean Reilly for closing remarks.

Well, thank you all for listening, and we look forward to visiting again come August.

This does conclude today's program. Thank you for your participation, and you may disconnect at any time.