Q3 2020 Lamar Advertising Co Earnings Call

Timing of any distributions to stockholders and the impacts in effect of the novel Corona virus.

On the Companys business financial condition and results of operations.

Over 2019 sales in October 2020.

Another strong data point was the recovery of our programmatic channel as October had a record setting month for programmatic billing.

And the vast majority of our markets are local advertising has normalized across most categories and while national advertising lag local again Q.

Q3 <unk>.

Employees to continue working from home in urban areas experiencing more dramatic decreases and tourism entertainment and other activity our local business significantly outperformed national.

The percentage decline in national was over three times that of our local business with the impact, particularly pronounced along the east and West coast.

While our local business experienced a revenue decline in the high single digits. The decline in national was almost 30%.

Though national improved as we progress through the quarter.

As a result of this divergence local revenue accounted for 80% of sales in third quarter, while national business represented only 20%.

Our revenue mix of local versus national and Billboard versus transit in the airport contribute to our industry, leading best in class operating margins and along with our balance sheet differentiate us significantly from our peer group.

Actions considered.

Turning to our balance sheet we.

We continue to benefit from the steps we took earlier this year as well as during the pending to fortify the company's capital structure.

Lamar enjoys excellent access to the capital markets as evidenced by our ability to access the debt markets throughout the COVID-19 pandemic.

In August we issued $150 million of additional 4% senior notes due 2030.

Given our current level of debt EBITDA would have to decline in excess of 80% from 2019 to breach the 4.5 times secured debt test and approximately 50% to breach the total debt covenant.

As you May recall, we experienced a minor breach of the dilution ratio under our ABL facility in Q2 and received a waiver and covenant relief for 90 days from our lender.

Though the dilution ratio is back in line with the original covenant level in October we executed an amendment of the facility to provide flexibility through maturity at the end of next year.

The amendment permanently increase the covenant levels for both the dilution and delinquency ratios.

Certain equity capital markets as we've mentioned previously a strong balance sheet is core to our operating strategy and served as a significant competitive advantage.

With our intense focus on the company's capital structure, and resulting fortress balance sheet with increased flexibility, we are well positioned to take advantage of opportunities as they arise I will now turn the call back over to Sean.

J.

Just.

To give a little color on some of the stats, particularly around national sales as J mentioned.

And Q3 local was down about 9% in national was down about 30%. However, we saw some very encouraging signs as the quarter progressed, particularly an RFP activity as I mentioned.

And I would also note that.

Anecdotally renewal activity.

Four 2021 on the national side looks encouraging as well.

The.

The headline on the digital front is R.

Aggressive and express new goal of deploying over 300 next year.

Our team feels good about that number and I also feel good about sufficient demand to support that kind of deployment.

And again just to talk about the.

The verticals, which as I mentioned normalizing at the local level.

Relative strength in hospitals, and insurance and gaming and automotive.

We're still struggling when it comes to event driven business or amusement entertainment and sports.

Category was down 55%.

Q3 and.

I just see a lot of room for improvement as we move into into next year.

Another strong category for Us of course has been beverages Millercoors Anheuser Busch.

In Bev.

Have really been good to us in Q3 and that continued into Q4.

With that Samantha we will open it up for questions.

In our book and our results is that in small and middle markets.

Business is pretty good and pretty strong.

So when you think about that part of our footprint, which is upwards of 80% of what we do.

The.

Small competitors are also doing well and so they're not they're not really looking to sell right and as Jay mentioned.

Yep Yep price expectations are there is there is a little bit of divergence between.

What we would like to pay and what what they will sell for.

But that'll battle right itself.

As the again as the World gets a little more normal next year I think next year is going to be a good year for us on the M&A front.

Once you have a coupon or five and three quarters and if we were to do a 10 year today with.

Low 4% range, so and opportunities for quite a bit of.

Interest savings there yeah.

Yes. Thank you.

Thank you. Our next question will come from Oleksiak quite dreamy when J P. Morgan.

I do a quick question. The first one sparkling back in your comments earlier about the furniture and performance between the smaller on a larger market.

I think it would be independent we were concerned that some of the Oh.

Oh, yes on regional yeah, they wouldn't survive and I'm curious it sounds like things are coming back.

So they are but I still I still worry I still worry about independent restaurants.

You know.

Stay pretty close to those folks here at home and they are struggling.

So that I think could be an issue.

It's yes.

Restaurants, typically run about 10% of our book.

Most of that is.

Quick service.

Models and the like.

But about.

20% of our restaurant business is are those independent operators that are sit down tablecloth indoor dining.

And.

I still worry for them I do and I don't think we're out of the woods, there and then I do worry a little bit for our small independent retailers.

Retail was a relative underperformer in Q3 as I mentioned.

So we're just going to have to pay close attention to that.

I have been asked to compare this particular event in 2020 to the great recession in 2009 and what.

May have been different and what may.

Be similar I.

I think when we close the book on this year, we will have outperformed that year that looks clear.

But what also looks to me and this is encouraging.

Is it.

It appears to look like a v. to me in our book So that is encouraging and that could help stem the tide of.

Small.

Independent retailers and restaurants that could save them next year.

Hi, Thank you very much.

Thank you once again at this time, if you would like to ask a question. Please press star one on your telephone keypad.

Our next question will come from.

Stephan Bisson with Wolfe research.

Good morning, good to talk to you.

Again.

A couple of quick ones for me on Q4 for the topline revenue in October was up year over year. What are you guys seeing X political.

In the quarter and how the months are progressing and then as a follow up.

On the M&A side should.

Just be extracted period of not being able to get the deals done just on the valuation what are some potential alternative uses of the cash that you normally been spending.

So the.

Alternative uses of cash ill take that one first course, we're going to we're going to ramp up our digital deployment next year I think thats, that's sort of the headline.

And.

As Jay mentioned, we are.

Assuming we have a decent macro and a good recovery next year, we're going to be increasing our distribution.

Yes as well.

And then that your first part of your question was around what.

Ex political revenue pacings in Q4, I think Oh, it was up to you.

When you kind of broke up a little bit there.

Sorry.

We are.

We are seeing X.

Ex political we're seeing.

Good strengthening in the book.

I would.

Add that.

In terms of our programmatic book that is exceptionally strong and ex political was.

Up in October.

That was encouraging.

And.

The categories that look to be recovering.

Our hopefully.

In the event space, that's where we have the most room to grow.

And also I would really really like for.

Retail just to show a little.

Out performance as we move into the holidays that would be a good sign as well and we think we're seeing that.

Great. Thanks, so much.

[laughter].

Thank you I'm not showing any further questions in the queue at this time.

I'd like to turn the call back over to Sean Reilly for any closing remarks.

Well, great. Thank you Samantha and thank you all for being on and listening and we will certainly look forward to visiting again as we move into 2021.

Thanks.

Yes.

Okay.

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