Hyatt Hotels Corp

The following is a recording for Vianca Strother with Lamar Advertising Corporate on Thursday, May 7, 2020, at 8 a.m. Central Time. 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 today, we will then open the floor for questions. In the course of this discussion, Lamar may make forward-looking statements regarding the company, including investments about its future financial performance, strategic goals, plans, and objectives, including with respect to the amount of timing of any distributions and stockholders, and the impacts and effects of the novel coronavirus on the company's business, financial conditions, 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 materially from the 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 2020 earnings release and its most recent annual report, on Form 10K as updated or supplemented by its quarterly reports on Form 10Q and current reports on Form 8K. Lamar refers you to those documents. Lamar's first quarter 2020 earnings release, which contains information required by Regulations G regarding certain non-GAAP financial measures, which furnished to the SEC on Form 8K this morning. is available on the investor section of the Lamar website, www.lamar.com. I would now like to turn the conference over to Sean Riley. Mr. Riley, you may begin.

Thank you, Carrie. Good morning, everyone. I trust that you and yours are safe and well. Welcome to Lamar's Q1 2020 earnings call. I want to begin by thanking our employees for their dedication and resilience through these trying times. They have distinguished themselves, as has the out-of-home industry. We and our colleagues in the industry have donated unprecedented amounts of our inventory to honor frontline health care workers and first responders and to amplify important messages about safety practices and public health in communities all across the country. We at Lamar have kept all of our constituents, employees, customers, shareholders, and the communities we serve top of mind. We are taking all necessary steps to ensure that we emerge stronger than ever as the crisis fades and our economy recovers. Our results in Q1 were strong and would have been stronger had business not turned midway through March, which we believe cost us $4 or $5 million in revenue. As it was, Q1 was our 40th consecutive quarter of revenue growth and an indication that the fundamentals of the out-of-home business, our ability to deliver large audiences at affordable prices with powerful messages, are prized by advertisers. Obviously, COVID-19 has set us back, and the question on everyone's mind is what's ahead. Our crystal ball is no clearer than anyone else's. However, we think that by the August call, we will be able to provide new full-year AFFO guidance to replace guidance we withdrew in April. But for now, I can tell you how April went. Revenues were approximately $116 million. a decline of approximately 20% from pro forma April 2019, and we generated net cash in the month even though we had some digital projects and completed some small acquisitions. That said, April is just a data point, and I would caution you not to extrapolate April into all of Q2. May will be a tough month also, likely a little tougher than April. But as we look through the windshield at the road ahead, we see encouraging signs. Our audience is the driving public, and in many, many of our markets, drivers are hitting the roads again. I can attest from personal experience that traffic is way up in Baton Rouge from a month ago, and many of our managers tell me the same is true in their markets as well. Since this began, we have been tracking driving activity by market using data provided by GeoPath. Go to their website at geopath.com. Scroll down to a link called Daily Mobility, and you can see for yourself virtually real-time updates of traffic by market compared to last year. Or go to our website at lamar.com, the investor section, and you can see each of our markets, its percentage contribution to our 2019 revenues, and up-to-date status of its traffic compared to last year. We plan on updating this weekly. It is a helpful tool, and I encourage you to look at it. The data revealed two things. Number one, travel activity across our markets, typical middle markets in Lamar land like Tallahassee and Boise and Baton Rouge, fell far less sharply and has rebounded far quicker than the top DMAs like New York City that were unfortunately hit so hard by COVID-19. Number two, the rebound in traffic is dramatic. As we noted in the release, markets that collectively generated 80% of our 2019 billboard revenues, traffic is already back in those markets to 75% of last year's average, and traffic is rising fast. As I mentioned, we're going to update this data every week so you can see progress by market. Now, it only starts with audience, and eyeballs are not customers. But on the customer front, we have turned the corner, meaning we are having fewer discussions about contract relief, be it cancellations, campaign deferrals, or flexible invoicing, and more conversations about renewals and new contracts. We've identified several of the verticals showing renewed activities in our release, including stalwarts, such as services, quick-serve restaurants, health care, financial institutions, and education. To that list, I would add a few things, like online education, home improvement, beer and wine, and with less air travel and more road travel this summer, regional tourism, maybe not Vegas or Disney World, but think Myrtle Beach and Hershey, Pennsylvania. It is clear that people are going to hit the road this summer. It's also clear that the traditional regional roadside businesses will do well, and we're going to be there for them. It's also clear from my calls with management that the nation's heartland is recovering economically faster than the I-95 corridor or the far west. Middle and smaller size markets are showing more sales activity than the top 10 markets in the country. In terms of OpEx and CapEx, we are also adjusting to the post-COVID reality. We have reduced our CapEx budget from $130 million to approximately $58 million and and we expect to reduce consolidated OPEX by at least $50 million from 2019's pro forma total of approximately $980 million. The big-ticket items in the reduction in expenses are $16.5 million in executive and management bonuses, at least $13 million in lease portfolio savings and reduced payments to transit and airport authorities, approximately $9 million in sales commissions, and $6.5 million in travel, entertainment, and the like. Keep in mind that Q1 CapEx and OpEx are out the door, so these cuts are even more impactful when spread over the final three quarters of the year. Jay?

Thanks, Sean. Good morning, everyone, and thank you for taking the time to join our call during this extraordinary time in our society and our economy. I will begin with some brief comments on the first quarter, then review our balance sheet, and conclude with a discussion of our current financial position, with particular focus on the company's debt obligations compliance with our financial covenants in the first quarter acquisition adjusted revenue growth was 4.4 percent while consolidated expenses grew only 1.8 percent an acquisition adjusted evida increased 8.7 percent adjusted evida was 159.8 million dollars compared to 146.1 million dollars for the first quarter of 2019 an increase of 9.4 percent and fully diluted affos increased 13.1% to $1.12 per share. Moving over to CapEx, total spend for the quarter was approximately $26 million, comprised of $15 million in growth CapEx and approximately $11 million in maintenance CapEx. As Sean mentioned, we have reduced our 2020 CapEx budget significantly by over 50% to approximately $58 million. CapEx for the balance of the year will be approximately $32 million and pretty evenly split between growth and maintenance with remaining growth capex representing expenditures of projects that we're contractually obligated to complete. Turning to our balance sheet, the steps we took during the first quarter should provide for greater stability while lowering both interest expense and scheduled debt amortization. Our balance sheet now is even stronger than in recent years, and we continue to believe Lamar enjoys access to both the debt and equity capital markets. The company ended the quarter with total leverage of 4.03 times net debt to EBITDA as defined under our credit facility. Furthermore, we had approximately $609 million of liquidity comprised of $497 million of cash on hand and $112 million of availability under our revolving credit facility. In March, we drew $535 million on our revolver out of an abundance of caution and currently have $625 million outstanding. For the month of April, the company was net cash positive and as of April 30th, we had approximately $518 million of cash, and our revolver availability remained unchanged from quarter end. During the first quarter, the company took advantage of a constructive backdrop within the capital markets, refinancing debt at favorable terms and further strengthening our balance sheet. These transactions provide significant benefits as we face the current unprecedented economic conditions, lowering our cost of debt, extending maturities, enhancing liquidity, and adding flexibility under our covenant structure. Altogether, the refinancing will result in $57 million of scheduled amortization savings this year and even greater savings of $73.5 million in 2021. Though we did not anticipate the current pandemic-related downturn, we wanted to ensure that we had the lowest possible cost of debt while maintaining the financial flexibility to withstand periods of weakness throughout the economic cycle. While the current environment was not in our analysis, we believe the steps taken will allow the company to endure, even if the current economic environment persists for an extended period of time. With the upsized revolver, amortization savings, and the steps we are taking to cut expenses, we are confident that we have ample liquidity to withstand this economic crisis, and we are well positioned for future growth once this pandemic-related downturn ends. Shifting to our new covenant structure, which provides greater flexibility, our Senior Secured Credit Agreement contains two financial covenants, a secured debt maintenance test of 4.5 times, which was increased from 3.5 times, and a total debt incurrence test of seven times, which also was increased in February from six times. Both tests are based on net debt to trailing 12-month EBITDA as defined under the credit agreement. At the end of the first quarter, our secured debt leverage was only 1.32 times even after the $535 million draw on the revolver in March. Prior to the draw on the credit facility and pro forma for closing of the refinancing transactions, our secured debt covenant was 0.9 times. At the current level of secured debt outstanding, our latest 12-month trailing EBITDA would have to decline approximately 70% from full year 2019 for the company to reach its maximum secured debt leverage. To put this in context, our EBITDA declined approximately 21% during the global financial crisis from year end 2007 to year end 2009. It should be noted that this covenant is only applicable to the revolver. If our line of credit is repaid and canceled, our secured debt covenant would no longer apply, even if the term loan B remained outstanding. Our second financial covenant is a limit on how much total debt the company may have outstanding relative to EBITDA. Unlike our secured debt test, total leverage is an incurrence test, which if not met, would only limit our ability to raise additional debt and not result in a default under any of our debt agreements. As mentioned, at the end of the first quarter, our total debt to EBITDA was 4.03 times up approximately 50 basis points from year end due to the revolver draw in March to increase our cash on hand. Under terms of our credit agreement, cash balances are not fully deducted from our secured or total debt balances, and the netting of cash against our debt is limited to a maximum of $150 million. At the current level of total debt outstanding, our latest 12-month trailing EBITDA would have to decline approximately 40% from full year 2019 for the company to reach its maximum total debt leverage. Hopefully this provides some clarity on the financial flexibility of Lamar, as we face the present level of economic uncertainty. As circumstances stand today, we do not anticipate the need to approach our bank groups seeking relief or amendment to any of our financial covenants for the foreseeable future. With that, I will now turn the call back over to Sean. Thanks, Jack.