Lamar Advertising Company

Excuse me, everyone. We now have Sean 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 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 to 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 and the company's second quarter 2025 earnings release and its most recent annual report on Form 10-K. Lamar refers you to those documents. Lamar's second 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, www.lamar.com. I would now like to turn the conference over to Sean Riley. Mr. Riley, you may begin.

Thank you, Madison. Good morning all and welcome to Lamar's second quarter 2025 earnings call. Our revenue growth accelerated in Q2 to 1.9% on a consolidated acquisition adjusted basis with year over year increases on both the local and national levels. and across billboards, airports, and logos. It was our 17th consecutive quarter of acquisition adjusted revenue growth. EBITDA increased by 2% on an acquisition adjusted basis, with a slight improvement in margins versus Q2 of last year. Reflecting on Q2 and on July, I would categorize the current operating environment as solid, but not spectacular. We are seeing increased activity in the form of national RFPs and local proposals, but some advertisers continue to maintain a cautious approach. As you can tell from the headlines, there's still a lot of uncertainty in the air. Current pacing suggests acquisition-adjusted growth for the back half will likely be better than Q2, with Q3 growth ahead of Q4, where we are comping against the election-related political spend in Q4 of 2024. We are particularly cautious about October. As a result, back half growth, again better than the first half, is not quite as strong as our earlier expectations. Consequently, as you saw, we have revised our guidance for full-year AFFO per share to a range of $8.10 to $8.20. There are some non-operational factors in that revision, including some one-time expenses associated with our exit from the Vancouver transit contract, which will cost us a few pennies on AFFO. Jay will walk you through these numbers in a little more detail in a moment. As for the loss of the contract, Vancouver since COVID and until very recently was negative to the bottom line, so we are not necessarily sorry to see it go. In the meantime, back to Q2. Categories of strength included services, building and construction, financial, and insurance, while beverages, education, and telecom were weaker. As mentioned, local and national were both higher, with programmatic up right around 10%. It's been an active year on the M&A front. Through Q2, we had spent $87 million in cash on 20 acquisitions, including a deal that we expect to close this morning, bringing the year-to-date total to approximately $110 million in cash acquisitions. In early July, meanwhile, we completed a milestone deal with the first-ever UpReek transaction in the billboard space. Our counterparty, Verde Outdoor, contributed their billboards in the Southeast, Northeast, and Midwest to us. In return, we issued nearly 1.2 million units in our operating partnership subsidiary to Verde's owners. These units entitled them to the same cash distributions as common shareholders. Meanwhile, the tax on their gains will be deferred until the units are converted to cash or Lamar shares, a conversion that they trigger on their own timetable. On the day we issued the units, the stock was trading about $124 per share, but recall that we bought back 1.3 million shares earlier this year, which we did knowing this deal was coming and recognizing that we had an opportunity to lock the price of the units that we would issue, if you will, at an attractive price point, which was about $1.08 per share across the buyback. The up-read is a really compelling option for sellers who like the outdoor business but want to diversify their asset base in a tax-efficient manner, all the while enjoying income from our distributions. For that reason, we expect that it will be a tool that we will use again and again, and I want to thank Ernie Garcia and the rest of the Verde ownership group for blazing this path with us. With that, I will turn it over to Jay to walk you through the numbers.

Thanks, Sean. Good morning, everyone, and thank you for joining us. We experienced modest growth in our portfolio during the second quarter. Growth in AFFO continued, which was nice to see, given AFFO grew almost 10% in Q2 a year ago. In the second quarter, acquisition adjusted revenue increased 1.9% from the same period last year, accelerating 80 basis points over the first quarter. Our billboard operations experienced low single-digit top-line growth, while the company's airport and logos division significantly outpaced the broader portfolio, growing revenue 11.7%, and 6.1% respectively. Acquisition adjusted consolidated expenses also increased 1.9% in the second quarter, which was better than our internal expectations. We now expect operating expense growth for the full year to come in around 2.5% on an acquisition adjusted basis. Adjusted EBITDA for the quarter was $278.4 million compared to $271.6 million in 2024, which was an increase of 2.5%. On an acquisition adjusted basis, adjusted EBITDA increased 2%. Adjusted EBITDA margin for the quarter remained strong at 48.1%, one of the strongest second quarters in recent history. Adjusted funds from operations totaled $225.3 million in the second quarter, compared to $213.5 million last year, an increase of 5.5%. Diluted AFFO per share increased 6.7% to $2.22 per share, versus $2.08 per share in the second quarter of 2024. Local and regional sales accounted for approximately 79% of billboard revenue in Q2, growing for the 17th 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. Subsequent to quarter end on July 31st, the contract between the company and TransLink in Vancouver, British Columbia matured and was terminated per terms of the agreement. While Vancouver Transit was a high revenue contract with approximately 23.5 million U.S. dollars expected for the full year across TransLink and an affiliated contract, the actual EBITDA contribution was budgeted for slightly less than 2 million U.S. dollars, a margin of less than 10%. the Vancouver business had struggled to break even since COVID and only turned cash flow positive in the second half of last year. Our original guidance assumed renewal of the contract, and the four-year impact to AFFO is approximately six cents per share, driven primarily by severance costs associated with our Canadian employees. On the capital expenditure front, total spend for the quarter was $38.2 million, including $13.3 million of maintenance capex, For the first half of the year, CapEx totaled $68.1 million. About a third of which was maintenance. And for the full year, we anticipate total CapEx of $180 million, with maintenance comprising $60 million. Moving to our balance sheet, we have a well-laddered 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 $3.4 billion in total consolidated debt, and our weighted average interest rate was 4.7%, with a weighted average debt maturity of 3.4 years. We ended the quarter with total leverage of 2.95 times net debt to EBITDA, as defined under our credit facility, which remains amongst the lowest level ever for the company. Our secured debt leverage was 0.95 times, and we're comfortably in compliance with both our total debt incurrence and secured debt maintenance tests, against covenants of seven times and 4.5 times respectively. For the full year, we expect total leverage at or below three times with secured leverage consistent as well at or below one times net debt to EBITDA. Our LTM interest coverage through June 30th improved to 6.8 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 more normal acquisition activity with an investment capacity over $1 billion. In addition, we have the ability to deploy this capital while remaining at or below the high end of 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 June 30th, we had $363 million in total liquidity comprised of approximately $56 million of cash on hand and $307 million available under our revolving credit facility. We ended the quarter with $434 million outstanding on the revolver and the company's AR securitization was fully drawn with a balance of $250 million. This morning, we revised our full year guidance and now expect AFFO to finish the year between $8.10 and $8.20 per diluted share, a reduction of 5.5 cents from the prior range at the midpoint. Cash interest in our revised 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 Vistar Media earlier this year. And finally, our dividend. We paid a cash dividend of $1.55 per share in both the first and second quarters. Management's recommendation will be to declare a cash dividend of $1.55 per share for the third quarter as well. This recommendation is subject to Board approval, and we will communicate the Board's decision. 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 Vistar sale. Again, we are pleased with our financial position and strong balance sheet, which should help mitigate any uncertainty that arises in the broader economic environment. I will now turn the call back over to Sean.