Q1 2024 Lamar Advertising Co Earnings Call
Operator: Excuse me, everyone. We now have Sean Reilly and Jay Johnson in conference.
Excuse me everyone. We now have Sean Reilly and Jay Johnson in conference.
Operator: 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, you may press star 1 on your telephone keypad.
Operator: Be aware that each of your lines is in a listen only mode.
Operator: At 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.
Operator: 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 conditions, 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.
Operator: 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 conditions and results.
Operator: Of operations all forward looking statements involve risks uncertainties and contingent contingencies, many of which are beyond the March control and which may cause actual results to differ materially from anticipated results.
Operator: 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 2024 earnings release and its most recent annual report on Form 10-K. It refers you to those documents. Lamar's first quarter 2024 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, was furnished to the SEC on a Form 8K this morning and is available on the Investors section of Lamar's website, www.lamar.com. I would now like to turn the conference over to Sean Reilly. Mr. Reilly, you may begin.
Operator: Lamar has identified important factors that could cause actual results to differ materially from those discussed in this company in this call and the company's first quarter 2024 earnings release and its most recent annual report on Form 10-K Lamar refers you to those documents Lamar <unk> first quarter 2024 earnings release, which contains information required by regulation G.
Operator: Regarding certain non-GAAP financial measures was furnished to the SEC on a form 8-K. This morning and is available on the investors section of the website Www Dot Lamar Dot Com I would now like to turn the conference over to Sean Reilly. Mr. Riley you may begin.
Sean E. Reilly: Thank you Michael Good morning, and welcome to Lamar's Q1, 2024 earnings call.
Sean E. Reilly: Thank you, Michael. Good morning, and welcome to Lamar's Q1 2024 earnings call. I'm pleased to report we had a very successful first quarter, one that exceeded our own internal expectations for both revenue and EBITDA growth, thanks to continued strength in local sales and renewed growth on our digital platform, both of which helped offset weakness in national ad spending. For the quarter, revenue grew 5.3% on an acquisition-adjusted basis, the largest increase since the third quarter of 2022 and the twelfth consecutive quarter of pro forma revenue growth. Ibida also increased 6.5% on the same acquisition-adjusted basis.
Sean E. Reilly: I'm pleased to report we had a very successful first quarter, one that exceeded our own internal expectations for both revenue and EBITDA growth. Thanks to continued strength in local sales and a renewed Chris on our digital platform.
Sean E. Reilly: <unk> helped to offset weakness in national AD spend for.
Sean E. Reilly: For the quarter revenue grew five 3% on an acquisition adjusted basis, the largest increase since the third quarter of 2022, and the 12th consecutive quarter of pro forma revenue growth.
Sean E. Reilly: EBITDA also increased six 5% on the same acquisition adjusted basis.
Sean E. Reilly: This despite some tough expense comps as a result of COVID relief grants received a year ago at our airport. Overall, the year is shaping up nicely, pacings for the rest of 2024 are materially stronger than this time last year, and therefore, we're raising our guidance for full year AFFO per share to the range of $7.75 to $7.90 per share. We are recommending that the board approve another $1.30 per share distribution for Q2, but if the year plays out as it appears it will, you will see us raise the distribution in August and perhaps also pay a special dividend at year end. Back to Q1, strong categories included service, amusements, and attractions, and building and construction, while health care and insurance were relatively weaker.
Sean E. Reilly: Despite some tough expense comps as a result of Covid relief grants received a year ago and our airport business overall, the year is shaping up nicely pacings for the rest of 2024 are materially stronger than this time last year. Therefore, we are raising our guidance for full year <unk> per share to the range of seven.
Sean E. Reilly: <unk> dollars 75 cents to $7 90 per share.
Sean E. Reilly: We are recommending that the board approve another dollar 30 cents per share distribution for Q2, but if the year plays out as it appears it will you will see us raise the distribution in August and perhaps also pay a special dividend at year end.
Sean E. Reilly: Back to Q1 strong categories included service amusements, and attractions and building and construction, while health care and insurance were relatively weaker.
Sean E. Reilly: Revenue from politics was $3.8 million, up nearly $3 million over the first quarter of 2023 and slightly ahead of the total for the first quarter of 2022. We expect politics to continue to be a tailwind this year. As I mentioned, our local business was extremely strong, up 6.7% versus the year earlier quarter. Programmatic was also very strong, up 27%. But on the whole, National was down about 5.5% versus the first quarter of 2020.
Sean E. Reilly: Revenue from political was $3 8 million up nearly 3 million over the first quarter of 2023 and slightly ahead of the total for the first quarter of 2022, we expect political to continue to be a tailwind this year.
Sean E. Reilly: As I mentioned, our local business was extremely strong up six 7% versus the year earlier quarter programmatic was also very strong up 27%.
Sean E. Reilly: But on the whole national was down about five 5% versus the first quarter of 2023.
Sean E. Reilly: We continue to see some larger accounts taking a cautious approach to their ad spend, and we foresee another decline in national in Q2, though maybe a tad better than in Q1. We are tweaking how we are pitching certain national accounts, and we are hopeful national will firm up as the year unfolds. I will note that we've had good success reselling the panels vacated by some of the national advertisers, which is reflected in the very strong local numbers that we saw in Q1.
Sean E. Reilly: We continue to see some larger accounts, taking a cautious approach to their AD spend and we foresee another decline in national in Q2, though maybe a tad better than in Q1, we are tweaking how we are pitching certain national accounts and we are hopeful national will firm up as the year unfolds.
Sean E. Reilly: I will note that we've had good success reselling the panels vacated by some of the national advertisers, which is reflected in the very strong local numbers that we saw in Q1.
Sean E. Reilly: On the digital side, Strength in Programmatic helped that platform grow 2.7% on a same-store basis. Digital revenues now account for about 29% of our billboard billing. It was a quiet quarter on the M&A front, as we closed four deals for a total of $18 million.
Sean E. Reilly: On the digital side strength in programmatic helped that platform grow two 7% on a same store basis digital revenues now account for about 29% of our Billboard billing.
Sean E. Reilly: It was a quiet quarter on the M&A front as we closed four deals for a total of $18 million and expect that to continue our plan remains to dedicate the bulk of our free cash flow. This year after dividends to paying off our $350 million term a loan which will further strengthen our balance sheet ahead of what we anticipate will be a more.
Sean E. Reilly: I expect that to continue. Our plan remains to dedicate the bulk of our free cash flow this year after dividends to paying off our $350 million Term A loan, which will further strengthen our balance sheet ahead of what we anticipate will be a more active period for deals in 2025 and beyond. Before I turn it over to Jay, on a personal note, I returned last night from our industry conference in California. It was a very upbeat meeting with lots of energy and optimism about out-of-home's position in the media landscape and the opportunities in front of us.
Sean E. Reilly: Active period for deals in 2025 and beyond.
Sean E. Reilly: Before I turn it over to Jay a personal note I returned last night from our industry Conference in California. It was very upbeat meeting with lots of energy and optimism about out of home is positioned in the media landscape and the opportunities in front of us.
Sean E. Reilly: Advertisers, particularly at the local level, clearly appreciate our ability to deliver contextually relevant, memorable messaging to their audience at competitive rates, at the right time, and in the right place. I was heartened to hear about some of the initiatives the industry is undertaking to enhance those capabilities. I know we're working hard here at Lamar to improve our game, and I'm excited to see what's ahead. With that, Jay, would you walk through some more numbers and give an update on our ERP project? Thanks, Sean.
Sean E. Reilly: Advertisers, particularly at the local level clearly appreciate our ability to deliver contextually relevant memorable messaging to their audience at competitive rates at the right time and in the right place.
Sean E. Reilly: I was heartened to hear about some of the initiatives. The industry is undertaking to enhance those capabilities I know, we're working hard here at Lamar to up our game and I'm excited to see what's ahead.
Sean: With that Jay will you walk through some more numbers and give an update on our ERP project.
Jay Lecoryelle Johnson: Thanks, Sean. Good morning, everyone, and thank you for joining us. We had a solid first quarter and are pleased with our results, not only surpassing budget on revenue and adjusted EBITDA but for operating expenses and AFFO as well. Q1 marked the second consecutive quarter of near double-digit AFFO growth as short-term interest rates are more stable, and we have seen strong re-acceleration on the top line. Our billboard regions experienced mid-single-digit top-line growth with the exception of the Midwest, which was essentially flat year over year.
Jay: Thanks, Shawn good morning, everyone and thank you for joining US we had a solid first quarter and are pleased with our results not only surpassing budget on revenue and adjusted EBITDA, but for operating expenses and <unk> as well.
Jay Lecoryelle Johnson: Q1 marks the second consecutive quarter of near double digit <unk> growth as short term interest rates are more stable and we have seen strong reacceleration on the top line.
Jay Lecoryelle Johnson: Our Billboard regions experienced mid single digit top line growth with the exception of the Midwest, which was essentially flat year over year.
Jay Lecoryelle Johnson: Well coming in below budget acquisition adjusted operating expenses increased four 4%, primarily driven by minimum guarantees to our airport partners returning to normal.
Jay Lecoryelle Johnson: While coming in below budget, Acquisition Adjusted Operating Expenses increased 4.4%, primarily driven by minimum guarantees to our airport partners returning to normal. As you may recall, in 2023, we benefited from COVID-19 relief grants in our airport business, especially in the first and third quarters, which will not repeat this year. Solid revenue growth in both Trans and Airport, which grew 11.6% and 20.4%, respectively, also contributed to expense growth with a heavier concentration of percentage rent contracts versus our core billboard portfolio.
Jay Lecoryelle Johnson: As you May recall in 2023, we benefited from COVID-19 relief grants in our airport business, especially in the first and third quarters, which will not repeat this year.
Jay Lecoryelle Johnson: Solid revenue growth in both transit and airport, which grew 11, 6% and 24% respectively.
Jay Lecoryelle Johnson: Also contributing to expense growth with a heavier concentration of percentage rent contracts versus our core Billboard portfolio.
Jay Lecoryelle Johnson: Acquisition adjusted operating expenses increased on a consolidated basis. However, the Billboard Division continued its focus on expense control exceeding our expectations with expenses declining by approximately 70 basis points year over year.
Jay Lecoryelle Johnson: Acquisition-adjusted operating expenses increased on a consolidated basis, but the billboard division continued its focus on expense control, exceeding our expectations with expenses declining by approximately 70 basis points year over year. Consolidate operating expense growth for the full year, acquisition-adjusted, should be in the 3 to 3.5% range. Adjusted even up for the quarter was $211.9 million compared to $198 million in 2023, which was an increase of 7.1%. On an acquisition-adjusted basis, Adjusted EBITDA expanded by 6.5%.
Jay Lecoryelle Johnson: Consolidated operating expense growth for the full year acquisition adjusted should be in the three to three 5% range.
Jay Lecoryelle Johnson: Adjusted EBITDA for the quarter was $211 9 million compared to $198 million in 2023, which was an increase of seven 1%.
Jay Lecoryelle Johnson: On an acquisition adjusted basis, adjusted EBITDA expanded by six 5%.
Jay Lecoryelle Johnson: Adjusted EBITDA margin for the quarter remained strong at 42, 5% what are the strongest first quarters in recent history, and expanding 50 basis points over the first quarter of 2023.
Jay Lecoryelle Johnson: Just to even out margin for the quarter, it remains strong at 42.5%, one of the strongest first quarters in recent history, and expanding 50 basis points over the first quarter of 2023. Adjusted funds from operations totaled $158.2 million in the first quarter, compared to $144.1 million last year, an increase of 9.8% despite cash interest rising by $3 million, a headwind of approximately 3 cents per share. Deluded AFFO per share increased 9.2% to $1.54 per share versus $1.41 in the first quarter of 2023.
Jay Lecoryelle Johnson: Adjusted funds from operations totaled $158 $2 million in the first quarter compared to $144 $1 million last year, an increase of nine 8%. Despite cashing interest rising by $3 million headwind of approximately <unk> <unk> per share.
Jay Lecoryelle Johnson: Diluted <unk> per share increased nine 2% to $1 54 per share versus $1 41 in the first quarter of 2023.
Jay Lecoryelle Johnson: Local and regional sales also grew for the 12th consecutive quarter, but softness in our national sales business continues to be a headwind to our overall revenue growth.
Jay Lecoryelle Johnson: Local and regional sales also grew for the 12th consecutive quarter, but softness in our national sales business continues to be a headwind to our overall revenue. In spite of the national backdrop, we are encouraged by the resilience of local and regional sales, which accounted for approximately 82% of billboard revenue in the first quarter, up from 78% in the fourth quarter of last year.
Jay Lecoryelle Johnson: In spite of the national backdrop, we're encouraged by the resilience of local and regional sales, which accounted for approximately 82% of Billboard revenue in the first quarter up from 78% in the fourth quarter of last year.
Jay Lecoryelle Johnson: On the capital expenditure front total spend for the quarter was approximately $29 $5 million, including $10 $8 million of maintenance Capex and for the full year, we anticipate total capex of $125 million.
Jay Lecoryelle Johnson: On the capital expenditure front, total spend for the quarter was approximately $29.5 million, including $10.8 million in maintenance capital expenditure. And for the full year, we anticipate total capital expenditure of $125 million, with maintenance capital expenditure comprising $50 million. And now, turning to our balance sheet, we have a well-laddered debt maturity schedule with no maturities until Term Loan A in 2025. This year we plan to use a substantial amount of cash flow after distribution to repay outstandings on the term loan aid and anticipate repaying any remaining balance on the revolving credit facility.
Jay Lecoryelle Johnson: With maintenance capex comprising $50 million.
Jay Lecoryelle Johnson: And now turning to our balance sheet.
Jay Lecoryelle Johnson: We have a well lettered debt maturity schedule with no maturities until the term loan a in 2025.
Jay Lecoryelle Johnson: This year, we plan to use a substantial amount of cash flow after distribution to repay outstanding on the term loan a and anticipate repaying any remaining balance to a draw on our revolving credit facility.
Jay Lecoryelle Johnson: The company's AR securitization matures in July 2025, and we will address that maturity, most likely through an extension, in the second half of this year or early next year. In addition, the company has no bond maturities until 2028. Based on debt outstanding at quarter end, our weighted average interest rate was 5.1%, with a weighted average debt maturity of four years. We ended the quarter with total leverage of 3.14 times, which remains amongst the lowest in the history of the company.
Jay Lecoryelle Johnson: The companies they are securitization matures in July 2025, and we will address that maturity most likely through an extension in the second half of this year or early next year.
Jay Lecoryelle Johnson: In addition, the company has no bond maturities until 2028.
Jay Lecoryelle Johnson: Based on debt outstanding at quarter end, our weighted average interest rate was five 1% with a weighted average debt maturity of four years.
Jay Lecoryelle Johnson: We ended the quarter with total leverage of $3, one four times, which remains amongst the lowest in making should give the company.
Jay Lecoryelle Johnson: Our Secured Debt Leverage was 1.06 times, and we're comfortably in compliance with both our Total Debt and Currents and Secured Debt Maintenance tests against covenants of 7 times and 4.5 times, respectively. If 2024 plays out as planned, we should end the year with total leverage below three times net debt to EBITDA as defined under our credit facility agreement. This focus on our balance sheet will result in approximately $1 billion of investment capacity while remaining at or below the high end of our target leverage range of 3.5 to 4 times net debt to EBIT.
Jay Lecoryelle Johnson: Our secured debt leverage was 1.06 times and we are comfortably in compliance with both our total death in currents and secured debt maintenance tests against covenant of seven times and four five times respectively.
Jay Lecoryelle Johnson: If 2024 plays out as planned we should end the year with total leverage below three times net debt to EBITDA as defined under our credit facility agreement.
Jay Lecoryelle Johnson: This focus on our balance sheet will result in approximately $1 billion of investment capacity, while remaining at or below the high end of our target leverage range of three five to four times net debt to EBITDA.
Jay Lecoryelle Johnson: Despite the sharp rise in interest rates over the past 24 months, and based on current guidance, our interest coverage should end the year at roughly six 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 indicator. The Healthy Coverage exemplifies the strength of our balance sheet and the ability to service our debt.
Jay Lecoryelle Johnson: Despite the sharp rise in interest rates over the past 24 months and based on current guidance. Our interest coverage should end the year at roughly six times adjusted debt to EBITDA and adjusted EBITDA to cash interest.
Jay Lecoryelle Johnson: While we do not have an interest coverage covenant in any of our debt agreements.
Jay Lecoryelle Johnson: We do monitor this important financial metrics.
Jay Lecoryelle Johnson: Healthy coverage exemplifies the strength of our balance sheet and the ability to service our debt.
Jay Lecoryelle Johnson: Our liquidity and access to capital remains strong as the company continues to enjoy access to both the debt and equity capital markets.
Jay Lecoryelle Johnson: Our liquidity and access to capital remain strong as the company continues to enjoy access to both the debt and equity capital markets. At the end of the quarter, we had approximately $635 million in total liquidity, comprised of $36.4 million of cash on hand and $598.4 million available under our revolving credit facility. We ended the quarter with $143 million outstanding on the revolver and $235.7 million drawn on the company's asset securitization.
Jay Lecoryelle Johnson: End of the quarter, we had approximately $635 million in total liquidity comprised of $36 $4 million of cash on hand and five.
Jay Lecoryelle Johnson: $598 $4 million available under our revolving credit facility.
Jay Lecoryelle Johnson: We ended the quarter with $143 million outstanding on the revolver and $235 $7 million drawn on the companies they are securitization.
Jay Lecoryelle Johnson: With our strong Q1 results and the outlook for the remainder of the year, we have increased our full-year AFFO guidance by 8 cents at the midpoint. We now expect an AFFO range of $7.75 to $7.90 per share in 2024. Full-year interest in our guidance totals $168 million, which assumes short-term interest rates are unchanged for the remainder of the year.
Jay Lecoryelle Johnson: With our strong Q1 results.
Jay Lecoryelle Johnson: And the outlook for the remainder of the year, we have increased our full year <unk> guidance by <unk> <unk> at the midpoint.
Jay Lecoryelle Johnson: We now expect an <unk> range of $7 75 to.
Jay Lecoryelle Johnson: The $7 19 per share in 2024.
Jay Lecoryelle Johnson: Well your interest in our guidance totaled $168 million, which assumes short term interest rates are unchanged for the remainder of the year.
Jay Lecoryelle Johnson: As I mentioned earlier, maintenance capex is budgeted for $50 million, and cash taxes are projected to come in around $10 million. And finally, our Technology Enhancement Initiative. We are pleased to announce that phase one of the company's technology transformation is complete with the go-live of our new ERP system on April 1st. I would like to thank the team at Lamar, as well as our partners, who have worked tirelessly over the past year to ensure this project was a success. The first phase focused primarily on addressing deferred maintenance and technical debt within our finance and accounting system.
Jay Lecoryelle Johnson: As I mentioned earlier maintenance Capex is budgeted for $50 million and cash taxes are projected to come in around $10 million.
Jay Lecoryelle Johnson: And finally our.
Jay Lecoryelle Johnson: Our technology enhancement initiatives.
Jay Lecoryelle Johnson: We are pleased to announce that phase one of the company's technology transformation is complete with a go live of our new ERP system on April 1st.
Jay Lecoryelle Johnson: I would like to thank the team at Lamar as well as our partners who have worked tirelessly over the past year to ensure this project was a success.
Jay Lecoryelle Johnson: The first phase focused primarily on addressing deferred maintenance and technical depth within our finance and accounting systems.
Jay Lecoryelle Johnson: Phase 2, which is scheduled to begin late Q2 or early Q3, will focus on the revenue side of the business as we look to modernize and rationalize technology across our sales platform. We are excited to begin this next phase of the transformation journey, bringing efficiencies to the sales process and making it easier for our customers to engage with Lamar. Again, we're quite pleased with this quarter's performance, particularly our strong local and regional sales, as well as the outperformance of transit and Airport on the top line.
Jay Lecoryelle Johnson: Phase II, which is scheduled to begin late Q2 early Q3, we will focus on the revenue side of the business as we look to modernize and rationalize technology across our sales platform.
Jay Lecoryelle Johnson: We are excited to begin this next phase of the transformation journey, bringing efficiencies to the sales process and making it easier for our customers to engage with Lamar.
Jay Lecoryelle Johnson: Again quite pleased with this quarter's performance, particularly our strong local and regional sales as well as the outperformance of transit and airport on the top line.
Jay Lecoryelle Johnson: We look forward to executing on our operating strategy for the remainder of 2024. I will now turn the call back over to Sean. Also, as Jay mentioned, a shout out to transit, particularly in Canada, which has returned to strong growth, and airports, which showed exceptional growth.
Jay Lecoryelle Johnson: We look forward to executing on our operating strategy for the remainder of 2024.
Jay Lecoryelle Johnson: I will now turn the call back over to Sean Thanks, Jay as Jay mentioned thinking about regions, we had relative strength across all but one of our regions I'm, particularly proud of New York and Seattle, They really raised their game on local sales in the face of national softness.
Jay Lecoryelle Johnson: Also as Jay mentioned, a shout out to transit, particularly.
Jay Lecoryelle Johnson: Particularly in Canada, which has returned to strong growth in airports, which showed exceptional growth.
Jay Lecoryelle Johnson: Most of Q1's growth came from rate, but we also saw some gains in occupancy.
Sean E. Reilly: Most of Q1's growth came from rate, but we also saw some gains in occupancy. On SaneBoard Digital, as I mentioned, we're proud to return to growth there at 2.7%. Recall that last year, for the full year, digital SaneBoard revenue was down 1.8%. So it's good to see that positive number again. In terms of local, regional versus national programmatic, roughly in Q1, 82% of the local population, 18% national. A tick up in local, it shows up in that stat.
Sean E. Reilly: On same board digital as I mentioned, we're proud to have returned to growth there at two 7%.
Sean E. Reilly: Recall that last year for all for the full year digital same board revenue was down one 8%. So good to see that positive number again.
Sean E. Reilly: In terms of local regional versus national programmatic rough.
Sean E. Reilly: Roughly in Q1, 82% local 18% national.
Sean E. Reilly: Pick up in local it shows up in that stat.
Sean E. Reilly: In fact, if you look at.
Sean E. Reilly: In fact, if you look at our top 10 customers, their revenue with us in Q1 totaled $23.3 million, which is less than 5% of our book. That just goes to illustrate that the strength is really across tens of thousands of local customers touched by our approximately 1,000 account executives. Again, on relative strength in verticals. Services were up 14.5%, restaurants were up 6%, amusements and attractions up 11.4%, and building and construction, this is a great number here, up 33.2%. Relative weakness, of course, as we mentioned, health care and insurance continue to lag. With that, Michael, I will open it up to questions.
Sean E. Reilly: Our top 10 customers.
Sean E. Reilly: Their revenue with us in Q1 totaled $23 $3 million, which is less than 5% of our book that just goes to illustrate that.
Sean E. Reilly: The strength is really across tens of thousands of local customers touched by our approximately 1000 account executives across the country.
Sean E. Reilly: Oh again on relative strength in verticals.
Sean E. Reilly: Services was up 14, 5%.
Sean E. Reilly: Restaurants were up 6%.
Sean E. Reilly: And attractions up 11, 4%.
Sean E. Reilly: And building and construction. This is a great number here of 33, 2%.
Sean E. Reilly: Relative weakness of course, as we mentioned health care and insurance continue to lag.
Sean E. Reilly: With that Michael I will open it up for questions.
Operator: Absolutely. At this time, if you would like to ask a question, please press the star key followed by the 1 key on your telephone keypad now. You may remove yourself from the queue at any time by pressing star 2. And once again, that is star and 1 if you'd like to ask a question. We'll pause for just a moment to allow questions to queue, and our first question will come from Cameron McVeigh with Morgan Stanley.
Speaker Change: Absolutely at this time, if you'd like to ask a question. Please press the star key followed by the one key on your telephone keypad now.
Operator: You may remove yourself from the queue at any time by pressing star two.
Operator: And once again that is star one if you'd like to ask a question.
Operator: We'll pause for just a moment to allow questions to queue.
Cameron Alan McVeigh: And our first question will come from Cameron Mcknight with Morgan Stanley.
Cameron Alan McVeigh: Shawn Hey, Jay.
Operator: Take care, everyone.
Cameron Alan McVeigh: Hey, good morning, Kevin.
Cameron Alan McVeigh: Just a couple questions here. To start, you know, if you look to the remainder of the year, how do you expect the cadence of organic growth to shape up, especially with consideration to the election in the back half of the year?
Cameron Alan McVeigh: Just a couple of questions here to start you know as you look to the remainder of the year. How do you expect the cadence of organic growth to shape up, especially with consideration to the election in the back half of the year.
Sean E. Reilly: Sure, so we have April in house already, and its growth was roughly the same as Q1. In terms of Cadence playing out quarterly, Um, you know, Q2 might be a tad... It's lower in its pro forma growth than Q1, but we see the back half being materially better. Again, we're going to get that lift from politics, as you mentioned. I wouldn't, I wouldn't look too much at the quote, quarterly variation, actually. They're all going to be relatively in the same ballpark.
Cameron Alan McVeigh: Sure.
Cameron Alan McVeigh: So we have April and in in house already and its growth was roughly the same as Q1.
Sean E. Reilly: In terms of cadence playing out quarterly.
Sean E. Reilly: You know Q2 might be a tad.
Sean E. Reilly: Lower and its pro forma growth in Q1, but we see the back half being materially better.
Sean E. Reilly: Again, we're going to get that lift from from political as you mentioned so.
Sean E. Reilly: But.
Sean E. Reilly: I wouldn't.
Sean E. Reilly: I wouldn't look to too much quote quarterly variation actually it's they're all going to be relatively in the same ballpark.
Cameron Alan McVeigh: Got it. Thank you. And then secondly, I noticed the expected stock-based comp increased by about $15 million for the year. Is that tied to performance versus what was originally budgeted, or maybe just more grants than you had expected?
Speaker Change: Got it thank you and then secondly.
Cameron Alan McVeigh: I noticed the expected stock based comp increased by about $15 million for the year is that tied to performance versus what was originally budgeted or maybe just more more grants and you would expect it.
Speaker Change: That you you nailed it right. There you know last year, we didn't hit our internal goals and we had less.
Sean E. Reilly: You nailed it right there. Last year, we didn't hit our internal goals, and we had fewer Performance Stock Awards. This year, we are going to exceed our internal goals. And so that's the difference.
Sean E. Reilly: Performing stock awards. This year, we are going to exceed our internal goals and so that's the difference.
Sean E. Reilly: Got it and then okay and finally on <unk>.
Cameron Alan McVeigh: Got it. And then, okay, and finally, Do you have any further color on the expected timing of the NLL usage and how that might impact distribution going forward?
Cameron Alan McVeigh: Do you have any further color on the expected timing of the NOL usage and how that might impact the distribution going forward.
Sean E. Reilly: I'll kick that one over to Jay with the comment that we're basically running out of NOELs as we speak, and that is the reason that you'll see a jump in the distribution in the back half.
Cameron Alan McVeigh: I'll I'll kick that one over to Jay with the comment that.
Speaker Change: We are.
Jay: We're basically running out of Nols as we as we speak and that is the reason that we will you'll see a jump in the distribution in the back half.
Jay Lecoryelle Johnson: That's right, Cameron. As you recall, I think we converted to a REIT in 2014, and we've been using NOLs since that time to moderate our taxable income. If this year plays out as we anticipate, this will be the last year that we will be able to use NOLs. And going forward, what you'll see is an increased pressure on our distribution as we seek to distribute 100% of our taxable income in compliance with our policy.
Jay: That's right Cameron as you recall I think we converted to a REIT in 2014, and we've been using Nols since that time to moderate our taxable income.
Cameron Alan McVeigh: Understood. Thank you both.
Cameron Alan McVeigh: This year plays out as we anticipate this will be the last year that we would be able to use the nols and going forward, what you'll see is the upward pressure on.
Cameron Alan McVeigh: On our distribution as we seek to distribute 100% of our taxable income in compliance with our policy.
Cameron Alan McVeigh: Yeah.
Speaker Change: Understood. Thank you both.
Speaker Change: Yes. Thanks.
Operator: And we have our next question from David Karnofsky of J.P. Morgan.
Cameron Alan McVeigh: And we have our next question from David Karnofsky with J P. Morgan.
Operator: Yes, Hi, this is Ken on for David.
David Karnofsky: Yes, hi, this is Kedam on behalf of David. I just wanted to ask about cost guidance for 2024. You guys guided it to between three and three and a half percent. I just wanted to ask about the puts and takes that'll push you either to the high or low end of that range.
Speaker Change: I just wanted to ask about.
David Karnofsky: Cost guidance for 2024.
David Karnofsky: You guys guided it to between three to three <unk> percent.
David Karnofsky: I just wanted to ask about the puts and takes that will push you either to the high or low end of that range.
David Karnofsky: I assume that it contemplates.
David Karnofsky: I assume that it contemplates, you know, two to two point five percent of Normalize. ExpenseGrowthPlus, the roll off of COVID, Relief Grants and Peak ERP Spending, and Nicolo there.
David Karnofsky: Two to two 5%.
David Karnofsky: Yes.
David Karnofsky: Normalized.
David Karnofsky: Expense growth plus.
David Karnofsky: The roll off of Covid.
David Karnofsky: Relief grants and peak <unk>.
David Karnofsky: <unk> spending.
David Karnofsky: So.
Speaker Change: Any color that.
David Karnofsky: You can shut on that; it would be helpful. Sure. Yeah, yeah. If I understand the question, your model. Or are you modeling a little more than 3% growth on top?
Speaker Change: You can shed on that.
Nicolo: Would be helpful sure.
Nicolo: Yeah, if I understand the question.
Nicolo: You All's model.
Nicolo: Or are your modeling a little more than 3% growth on the top three to five what would take it okay I got it I got it.
David Karnofsky: Okay, I got it. I've got it. Okay, I got it. I got it. Got it. Got it.
Nicolo: Okay got it got it got it got it.
Nicolo: What takes it to the to the upper end of of of what you just said to the 5%.
David Karnofsky: Both.
Sean E. Reilly: You know, what takes it to the upper end of what you just said about 5% growth? Um, you know, look, if we have really steady performance in local sales like we demonstrated in Q1, and a modest, modest recovery in Nashville. We'll get there. We'll get to the top end of that range.
Nicolo: You know look if if if.
Sean E. Reilly: If we have it.
Sean E. Reilly: Really steady.
Sean E. Reilly: Our performance in local sales like we demonstrated in Q1 and a modest.
Sean E. Reilly: Modest recovery in national.
Sean E. Reilly: We will get there we will get to the top end of that range.
Sean E. Reilly: Okay.
Sean E. Reilly: And then on the expense side I think your models spot on I think you are right. It's the return of COVID-19 relief grants as.
Sean E. Reilly: And then on the expense side, I think your model's spot on. I think you're right about the return of COVID-19 relief grants.
Sean E. Reilly: I think you're right; the return of COVID-19 relief grants as well as PQRP spending are the major drivers.
Sean E. Reilly: As well as peak ERP spending what are the major drivers.
Sean E. Reilly: And just a reminder, if you'd like to ask a question. Please press the star and one on your telephone keypad now.
Operator: And just a reminder, if you'd like to ask a question, please press the star and one on your telephone keypad now. And our next question comes from Jason Bazinet with Citi.
Operator: And our next question comes from Jason Bazinet with Citi.
Jason Boisvert Bazinet: This may be sort of a strange question, but.
Jason Boisvert Bazinet: This may be sort of a strange question, but when I read the press, it feels like, you know, consumers are sort of more upset about the health of the economy. They don't like, you know, the inflation that's going on, and their wages aren't keeping up. But the ad numbers have been pretty strong. Are there any sort of areas that you're looking at that are showing signs of stress? Or is sort of the aggregate numbers that you put up and the commentary you're getting from your sales force all as constructive as the aggregate top line that you guys were talking about?
Jason Boisvert Bazinet: It feels like consumers are sort of more upset at the health of the economy.
Jason Boisvert Bazinet: They don't like the inflation thats going on in their wages are keeping up.
Jason Boisvert Bazinet: But the AD numbers have been have been pretty strong are there are there any sort of areas that youre looking at that or that youre shortage, showing signs of stress or sort of the aggregate numbers that you put up in the commentary you're getting from your sales force.
Jason Boisvert Bazinet: All in all as constructive as the aggregate top line that you guys were talking about.
Sean E. Reilly: Yeah, hey Jason, one of the data points I mentioned was the relative strength of quick service restaurants, and you know, of course, they've been all over the news talking about the strength of the consumer. But in our book, they were up 6%, right? So, you know, I would say that, at least in terms of... Lamar's book of business, we're not seeing it.
Jason Boisvert Bazinet: Yeah.
Speaker Change: Hey, Jason.
Sean E. Reilly: You know one of the data points I mentioned was the relative strength in quick service restaurants, and you know of course, they've been all over the news talking about the strength of the consumer.
Sean E. Reilly: But in our book they were up 6% right.
Sean E. Reilly: So you know I I would say that at least in terms of.
Sean E. Reilly: Lamar's book of business, we're not seeing that.
Sean E. Reilly: Okay.
Jason Boisvert Bazinet: That's great. All right. Thank you.
Jason: That's great alright, thank you.
Jason Boisvert Bazinet: Okay.
Operator: And that does conclude today's Q&A session. I will now turn the call back over to Sean Reilly for his closing remarks.
Jason Boisvert Bazinet: And that does conclude today's Q&A session I will now turn the call back over to Sean Reilly for closing remarks.
Operator: Yeah.
Sean E. Reilly: Thanks, Michael, and thanks to all for your interest in Lamar. We look forward to chatting again in August.
Sean E. Reilly: Well, thanks, Michael and thanks all for.
Sean E. Reilly: Your interest in Lamar, we look forward to chatting again in August.
Operator: Thank you. This does conclude today's teleconference. Thank you for your participation. You may now disconnect.
Speaker Change: Thank you. This does conclude today's teleconference. Thank you for your participation you may now disconnect.
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