Q3 2019 Earnings Call

Yeah that Sean Reilly NJ Johnson in conference.

Please be aware that each of your line is the name listen only mode.

The conclusion of the company's presentation, we will open the floor for questions.

To ask a question you May press star one on your telephone keypad.

In the course of this discussion lumbar 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.

All forward looking statements involve risks uncertainties and contingencies, many of which are beyond the bars 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 third.

Corner in 2019 earnings release and its most recent annual report on Form 10-K Dash eight as updated was supplemented by a quarterly reports on Form 10-Q , and current reports on form 8-K Lamar refers you to those documents.

<unk> third quarter 2019 earnings release, which contains information required by regulation G regarding certain non-GAAP financial measures was furnished to the FCC any form 8-K. This morning and is available on the Investor section of Lamar's website, Www dot lumbar dot com.

I would now like to turn this conference ever to Sean Reilly Mr. broadly you may begin.

Thank you Sean Joe Good morning, everyone and welcome to Lamar's Q3, 2019 earnings call.

Q3 was strong across virtually all lines and every metric. Consequently, we were able to grow assets, so over 8% and hey, AFFO per share over 7%.

Our team continues to execute well on controlling expenses on integrating acquisitions and on optimizing our digital platform and programmatic channels.

Looking ahead, we see acquisition adjusted growth for Q4 coming in at around the same as Q3, let's call it 3% to 3.5%.

Keep in mind, we're comping against the 5.6% growth last Q4.

Assuming Q4 comes in the way, we anticipate we will end the year at the top end of our AFFO per share guidance.

Finally in early word on 2020.

I believe the set up for 2020 looks good number one political which was a slight headwind this year will be a tailwind next year.

Number two we anticipate that acceleration in our programmatic channel will provide additional tailwind.

Okay.

Thanks, John Good morning, everyone.

First I would like to say, what an honor and privilege. It is to join the more as CFO .

I look forward to getting to know our investors in spending more time with analysts that cover the company.

I would like to congratulate Keith on an exceptional career at Lamar leading to finance organization and thank him personally for his knowledge. During this transition period duty ended the year.

I was excited to join Lamar because its outstanding team.

Quality portfolio size and scale within the out of home advertising space as well as its balance sheet and financial strain.

All of which should continue to position the company for growth.

As shown indicated we had a good third quarter.

Acquisition adjusted revenue growth accelerated while holding consolidated expenses under control with an increase of only 1.4%.

Oh, it expenses were elevated slightly in the first half of the here, particularly in the first quarter due primarily to acquisition activity.

We anticipated these expenses with moderate in the back after the year, which continue to experience that moderation in the fourth quarter.

As mentioned previously we're forecasting consolidated expense growth for the full year to comment around the historical 2% level [noise].

Acquisition adjusted EBITDA also accelerate in the quarter increasing 5.6%.

Hey, if that's all grew 8.6% to $163 million a $1.62 cents per share.

On the capital expenditure for us.

Total spend for the quarter was approximately $37 million.

Comprised of $24 million or growth Capex and $13 million a maintenance capex.

For the full year, we expect $80 million of growth Capex and $48 million a maintenance for toll of approximately $128 million.

Before turning the call back over to Sean I would like to touch on our balance sheet.

Our financial position remains strong at Lamar enjoys excellent access to capital in both the debt and equity markets.

The company ended the quarter with total leverage a 3.66 times net debt to EBITDA as defined under the senior credit facility.

Furthermore, we had approximately $345 million of liquidity.

Riser $322 million available under our revolving credit facility and $23 million or cash on hand.

In addition, the company has a well laddered debt maturity schedule with no maturities until December of 2021.

Again, I am thrilled to be on board.

Look forward to working with you all into contributing to the continued success of the company show great. Thanks, Jay before I open up for questions I'll touch on some of the metrics that you're familiar with I'll start with.

Where we are with our digital deployments and same board digital performance. We ended Q3 with 300 and I'm sorry, 3485 units in the air that includes a number by acquisition.

Will end up the year.

At approximately 350, new Digital's added to our platform 200 to those approximately will be.

Once we put up on our own organically in about 125.

We'll have been added by acquisition.

Same board digital performance continues to shine it up 6.9%.

[noise]. So we're pleased to see that number in terms of local national.

Our Q3 19 local book was 74% of our total book our National book was 26%.

Of our total book.

Local was up 3.1% and national slashed Programatic was up 6.9%.

Note that that is Billboard space only.

For those numbers.

And also note that we are quoting national and programmatic together on growth for now because programmatic is virtually all national.

As we speak.

In terms of acquisitions year to date, we've closed about 215 million in acquisitions.

We've got another 20 to 25 million or so in the cues that will close by year end. So we'll end the year at roughly 235 to 240 million in total acquisitions for 2019.

In terms of verticals a service continues to shine it up 8% hospitals also up 8%.

Financial up 11% and insurance about 41%.

In Q3 of this year.

For Q3 of last year, so insurance.

Really came on strong force.

The one soft spot was gaming, which was down 5%.

Q3.

2019.

So with that Sean tell we're happy to open it up for questions.

[noise]. Thank you very much ladies and gentlemen at this time, we would like to open the floor for questions. If you would like to ask a question. Please press star one on your telephone keypad now again that is star one to ask the question.

Our first question will come from Marci Ryvicker.

Wolfe research.

I'm wanting to take a little deeper into programmatic and try to understand how big of a contribution. This plays if there's any visibility going forward either for Q4 or for 2020.

So Ah Hey, Marcy so for Q3 programmatic was 3.9 million.

Which was you know a nice contribution to our organic growth.

You know this year that number you know I mean, I'm sorry, this quarter for Q4 that number should be you know for.

And some change it's it's a little harder to predict exactly where programmatic is going to land we.

Bill it.

Every two weeks in arrears, so we don't see it until the 15th and the Thirtyth of every month.

We're getting a little better at predicting it but keep in mind. This is this is the first inning of of programmatic in and out of home. So.

We're all kind of get used to it.

We've seen good quarter over quarter growth and so we hope to be able to carried that momentum into 20 twond.

And would you consider this completely incremental.

Right now we're highly confident it's a new digital dollars that we otherwise would not have captured its again first inning and the numbers are relatively small.

So we feel confident that that.

When that does the numbers are our small.

It's it's 100% incremental you know as the numbers get bigger will have to see where the dollars are coming from but right. Now these are.

Digital dollars that.

Otherwise not becoming to our platform.

Okay, and then in general you've seen some nice acceleration basically from Q to Q3 across everything including same unit digital any comment on where the strength is coming from if its categories. If it's just broad based like we heard from outside Asinine, and then I'm starting in the follow on it you did not comment on the auto kind of.

Right, so wondering where that fits and between healthy it not healthy category.

So.

Yeah. It was I would say the strength was broad based across the board you know it was nice to see.

The way the insurance category came in there very sophisticated buyers and they also by deep they buy.

Below the top 20, the amazing so that was a good healthy sign for us.

I didn't touch on auto because it wasn't a standout either way it was absolutely flat. So we it was it's 5% of our booking and.

Flat for the quarter.

Okay. Thank you.

Yep.

Thank you. Our next question will come from Ben Swinburne Morgan Stanley .

Hey, good morning, guys.

Could you give this a little sense of the sort of regional performance in the business, how much sort of the a you know sort of the the bigger markets in coastal markets compared to middle of the country oil patch just to give us a sense of how the business is trending around around your footprint.

Sure.

I would say that are in general its a.

Coastal.

The Atlantic Seaboard, the Pacific Seaboard performed a marginally stronger than.

And the central part of the United States.

Yeah, I would say the divergence between big and small was was still there, but less pronounced a then the first half of the year.

That's how I'd describe it.

Okay. That's helpful and then.

Just a couple of sort of financial side any just rough guidance on Opex trends for Q4, and then you guys had been quite active in the acquisition on the acquisition front I'm. Just wondering if you look out over the next six to 12 months, what how would you sort of describe the pipeline and sort of the where sellers heads are at at this point in terms of can.

Genuine to drive accretive acquisitions.

I'm sure on the acquisition front.

No. This was a pretty this was a pretty strong year or.

Well, what I would consider sort of our our traditional sort of tuck in activity.

That said looking out next year.

No I would it would be my anticipation that we would come in and around the 150, mark give or take.

It's a pipeline holds up.

And on the Opex side.

Q4 should look like a little bit like like Q3.

You know I think as Jay mentioned will will come in for the year at that familiar right around 2%.

Okay.

Okay. Thank you.

Thank you once again as a quick reminder, ladies and gentlemen, if you would like to ask a question you May press star one on your telephone keypad now.

Our next question will come from David Miller Imperial capital.

Yeah, Hey, guys. So the last analyst pretty much asked all the questions that I wanted to ask so you guys can move onto the next analyst sorry about that.

Thanks, David that was an easy one [laughter].

[noise] again as a quick reminder to ask a question you May press star one on your telephone keypad now.

Again that is still our one to ask a question.

[noise]. Our next question will come from Alexia Quadrani JP Morgan.

Hi, This is an eye on for Alexia. Thank you. So much for the question just wondering in terms of your digital Billboard conversions and the acquisition of digital Billboards. How much is your percentage of revenue from digital now and where do you think that penetration can go and the next few years. Thanks.

Hey, Thanks, and a good question so.

You know this year digital is gonna be somewhere north of 400 million and our book of business. In total book is going to come in and around you know, let's call. It a billion 750 million or so.

So you know give or take 20% to 23% is digital today.

And we're going to try to grow that as fast as we can in terms of where we think it can go there's lots of ways to think about that.

For example in the UK digital is over 50% of total out of home.

A lot of that's driven by the fact that trends that out of home tends to be a larger percentage of digital.

But that being the case it just it just goes to show you that we probably have some.

A lot of running room on on building out our digital footprint.

I hesitate to say this to folks because they sometimes misinterpreted, but I'll do it anyway, we've got about 170000 traditional Billboard faces.

And as I mentioned, only only 3845 of them or or you know somewhere in the neighborhood of 2% or digital today.

That also sort of indicates that we've got a lot of running room.

So we're we're we're gonna grow that platform absolutely fast as we can.

Great. Thank you.

Yep.

Thank you very much at this time, we have no further questions in the queue. So wed like to turn the conference back over to shop for closing remarks.

Well, thanks, everyone for listening and we look forward to visiting with you in 2020.

Thank you very much ladies and gentlemen at this time. This now concludes today's conference you may disconnect your phone lines and have a great rest of the week. Thank you.