Q1 2025 Lamar Advertising Co Earnings Call
Excuse me everyone, we now have Sean Reilly and Jay Johnson in conference.
Speaker Change: 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 the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.
Lamar: In the course of this discussion, Lamar may wake 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.
Lamar: including inflationary pressures on the company's business, financial condition, and results of operations.
Lamar: 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: 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 2025 earnings release and its most recent annual report on Form 10-K. Lamar refers you to those documents.
Lamar: Lamar's first quarter 2025 earnings release, which contains information required by regulation G regarding certain non-GAAP financial measures.
Speaker Change: 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.
Sean Reilly: Thank you, Raysa. Good morning all and welcome to Lamar's Q1 2025 earnings call.
Sean Reilly: In the first quarter, we delivered our 16th consecutive quarter of acquisition adjusted revenue growth with an increase of 1.1%. Both local and programmatic revenue were higher, while national was slightly down year over year.
Sean Reilly: Recall that Q1 2024 had an ex-day revenue due to leap year and the 2024 Super Bowl was in Las Vegas, our largest airport market and one of our largest billboard markets. With those headwinds in mind, revenue growth for Q1 2025 came in about as we had anticipated.
Sean Reilly: As noted in the release, we are still pacing to reach our previously provided guidance.
Sean Reilly: for Full Year AFFO for Share. We are obviously keeping a close eye on the broader economy, but out of home has historically proven to be a resilient medium in times of uncertainty.
Sean Reilly: and we are not seeing any cancellations or hearing anything from local or national customers that suggest we're headed for trouble. To the contrary, I just returned from our industry confidence in Boston and our larger agency customers are telling us that it is steady as she
Sean Reilly: Okay, back to Q1. Categories of Strength Included Services, Retail, Construction, and Oil and Gas.
While gaming, restaurants, and amusin' [inaudible]
Showed Relative Weakness
Sean Reilly: Local regional sales were up about 1% while national was down slightly as mentioned.
Sean Reilly: On the M&A front we have been busy. In Q1 we closed 10 deals for about 22 million. We have since closed several more including the acquisition of a nice portfolio with a good digital footprint in the Northeast last week.
Sean Reilly: Our year-to-date spend is now north of 70 million and based on our pipeline, I'm confident that we will exceed the 150 million in spend that we projected in February .
Sean Reilly: Finally, as you saw in the release, we have repurchased 150 million of our stock at an average price, a little over $100, $8.
Sean Reilly: This effort began in March and concluded through a 10B-5-1 program in April .
Sean Reilly: Our decision to do this is evidence of our conviction that out of home has never been stronger.
Sean Reilly: and that at Lamar we are particularly well positioned for my product, market portfolio, and balance sheet perspective to build on our industry leadership's status.
Sean Reilly: With that, I will turn it over to Jay to walk through the numbers, Jay. Thanks, Sean. Good morning, everyone, and thank you for joining us. Our first quarter results exceeded internal expectations across revenue, adjusted EBITDA and AFFO.
Jay Johnson: Growth in AFFO continued in the first quarter, which was nice to see given AFFO grew almost 10% in Q1 a year ago.
Jay Johnson: Acquisition Adjusted Revenue increased 1.1% from the same period last year following a very strong first quarter in 2024, when pro form of revenue growth came in north of 5%
Jay Johnson: Our billboard regions experience the low single digit top line growth with the exception of the Southwest which was essentially flat year over year.
Jay Johnson: The company's airport and logos divisions outpace the broader portfolio growing revenue 2.8% and 2.3% respectively.
Jay Johnson: Acquisition Adjusted Condolulated Expenses Increased 2.6% in the first quarter, which was slightly better than anticipated, and should be in the 3% range for the full year.
Jay Johnson: Adjusted EBITDA with $210.2 million, compared to $211.9 million in 2024, declining 80 basis points in the quarter [inaudible]
Speaker Change: Adjusted EBITDA to increase 1% on an acquisition of adjusted bases, while adjusted EBITDA margin remained strong at approximately 41.6%.
Speaker Change: Adjusted funds from operations total $164.3 million in the first quarter compared to $158.2 million last year, an increase of 3.8%.
Speaker Change: The looted AFFO per share grew 3.9% to $1.60 per share versus $1.54 in the first quarter of 2024. Local and regional sales account of approximate 82% of billboard revenue in Q1 growing for the 16th consecutive quarter.
Speaker Change: This consistent performance exhibits the resilience of our core local advertising business and differentiates the company from our peer group.
Speaker Change: On the capital expenditure front, total spin for the quarter was $29.9 million, including $9.44 million dollars of maintenance cap X.
Speaker Change: and for the four-year, we anticipate total capex that were approximately $195 million with maintenance comprising $60 million.
Speaker Change: Moving to our balance sheet, we have a well-lettered debt maturity schedule with no maturities until the Term Lone Bee in February 27, followed by the company's AR Securitization later that year in October .
Speaker Change: At quarter end, we had approximately $3.2 billion in total consolidated debt and a weighted average interest rate was 4.6% with a weighted average debt maturity of 3.6 years.
Speaker Change: We enter the quarter with total leverage of 2.85 times net debt to EBITDA as defined on our credit facility which remains amongst the lowest level ever for the company.
Speaker Change: Our secured debt leverage was 0.83 times, and we're comfortably in compliance with both our total debt and currents and secured debt maintenance tests against covenants of seven times and 4.5 times respectively.
Speaker Change: For the full year, we expect total leverage at or below 3 times with secured leverage consistent as well at or below 1 times net debt to EBITDA.
Speaker Change: RLTM Interest Coverage through March 31st was 6.6 times adjusted eb.cash interest.
Speaker Change: While we do not have an interest coverage covenant in any of our debt agreements, we do monitor this important financial metric.
Speaker Change: The Healthy Coverage exemplifies the strength of our balance sheet and the ability to service our debt.
Speaker Change: As a result of the focus on our balance sheet, the company is well positioned, and we resume more normal acquisition activity, with an investment capacity of well over $1 billion.
Speaker Change: 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.
Speaker Change: Our liquidity and access to capital remains strong as the company continues to enjoy access to both the debt and equity capital markets.
Speaker Change: As of March 31st, we had just over $490 million in total liquidity comprised of $36.1 million of cash on hand and $455 million available under our revolving credit facility.
Speaker Change: We ended the quarter with $286 million outstanding on the revolver and $223.5 million drawn on the company's AR Securitization.
Speaker Change: As Sean mentioned, we began taking advantage of dislocation in the capital markets during March with repurchases of our Class A common stock and continued into April . To date, we have repurchased 1.39 million shares and approximately $108 per share.
Speaker Change: The repurchases are credited to AFFO with returns well in excess of the company's cost of capital.
Speaker Change: We have $100 million remaining under the Sherry Purchase Program, but plan to seek board approval to increase that authorization back to its historical $250 million level.
Speaker Change: In this morning's release, we affirmed our full-year AFFO guidance of $8.13 to $8.28 per share.
Speaker Change: As I touched on earlier, maintenance gap x is budgeted for $60 million and cash taxes are projected to come in around $10 million, which excludes any taxes related to this position of our interest in Vistar Media earlier this year.
Speaker Change: And finally, our dividend. We paid a cash dividend of $1.55 per share in the first quarter. Management's recommendation at the upcoming board meeting will be to declare a cash dividend of $1.55 per share for the second quarter as well.
Speaker Change: This recommendation is subject to Board approval and we will communicate the Board's decision following the Board of Directors meeting later this month.
Speaker Change: 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.
Speaker Change: Again, we're pleased with our financial position and strong balance sheet which should help mitigate any uncertainty that could arise in the broader economic environment. I will now turn the call back over to Sean.
Sean Reilly: Thank you, Jay. I will cover up some familiar earnings metrics and then open it up for questions.
Sean Reilly: Relative Regional Strength and Weakness, our Central and Midwest regions showed relative strength in Q1 while our Southwest region which of course includes Las Vegas, and our Gulf Coast region showed relative weakness.
Sean Reilly: As I already mentioned, programmatic grew almost 30% in Q1 and it continues to perform well as we move into Q2. Digital overall also continues to perform well as we move through Q2.
Sean Reilly: In terms of sales mix for Q1, 82% was local, regional, while 18% was national, programmatic.
I mention categories of relative strength.
Sean Reilly: Categories of Relative Weakness, Included Restaurants, Down 4% and Gaming, Down 9%
With that, let's open it up for questions.
Speaker Change: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, to ask a question that is star and one.
Speaker Change: We'll take our first question from Cameron McVeigh with Morgan Stanley . Your line is open.
Hey, good morning.
Take care and support him.
Speaker Change: One of the asks, if you're still expecting the 3% organic revenue growth for the year, and maybe how you would expect the quarters to trend based off your current visibility.
Speaker Change: And then secondly, you know, in your view, Sean, what do you think is causing the national softness this quarter, or was that all comprolated? Thanks.
so
Speaker Change: Just a little color on our pastings and where we are today relative to that goal that you mentioned of being up approximately 3% for, you know, let's call it the midpoint of the range dish.
Speaker Change: Right now we are 75% booked to that goal as we sit today so the visibility is pretty good. It's not perfect but I'd say that's pretty good. That's pretty much on par with where we would be every year about this time.
Speaker Change: Makes up for some of that national weakness you've heard me say it before. Some of it's just some large customers that have changed their buying habits, you know, pointed out insurance.
It
As I mentioned in my comments,
the
Speaker Change: Conference we had in Boston was actually very bullish and I came away from it feeling better about how national is going to perform as we move through the year.
Thank you.
Speaker Change: Our next question comes from Jason Bazinet with City. Your line is open.
Jason Basnet: Oh, thanks. I guess I can't think of too many times in the past where...
Jason Basnet: Investors are quite convinced we're going to go on an economic slowdown and every company that reports, including yours, indicates that there is no weakness going on. So my question is, does this period of time, can you draw any analogies to what's?
Jason Basnet: to what this feels like in terms of the disconnect between investors and what you're seeing on the ground. And if investors are indeed right, what's the early sort of indicator that you get? Is it
Jason Basnet: Yeah, you know, I think you've heard me say this before, it's typically it's our shorter cycle sale that could be the canary in the coal mine. So...
Jason Basnet: You know, we look at how digital, which is our shorter cycle sale.
is performing how it's performing relative to the overall footprint.
Jason Basnet: and the news there are solid, so that gives us some confidence as we sit today.
Thank you. Thank you.
Jason Basnet: I can't remember when we were last together and we were talking about the conversation and the questions I was getting was, well, how do your hurdles, how do they perform when you go into a recession?
Jason Basnet: And of course, you know, I'm still getting those questions. Now they're more like, how do your verticals perform when you have a tariff war, which I've never been through a tariff war, but you know, right now, again, it's all I can say is, it's basically steady as she goes.
That's great.
Speaker Change: Can I just one follow up question? Sure. Sure. Maybe I'm maybe I'm wrong about this, but I feel like the sort of legal vertical has become far more prominent today than it was in the past. Is that a fair characterization?
Yeah, absolutely. So, we break it out as services.
And okay, that category is approximately...
Speaker Change: 20% of our book and legal services makes up approximately 50% of that.
Speaker Change: So legal services have grown to give or take 10% [inaudible]
Speaker Change: in bulk. They keep their presence all year and it's working for them.
That's great. Thank you for the color. Yeah.
David Karnosky: Our next question comes from David Karnovsky with JP Morgan. Your line is open.
David Karnosky: I don't know if you can frame how to think about the inorganic contribution to revenue growth should you execute on that full 150 and then can you just update us on the expectation for expense groups for the year I think last time you framed it around 3% thanks.
Jay Johnson: Yeah, so we're still pacing around that 3% expense growth, right, Jay? Yeah, pretty much there.
David Karnosky: You know, I think we're going to be well north of 200 million in acquisition activity by the time we close out this year.
David Karnosky: We've got one that I can't mention on the phone call right now but we're really excited about over here so yeah it's going to be a good contributor and I think we'll be able to give you more color on the inorganic.
Contribution in August .
Thanks.
Yep.
Speaker Change: Our next question comes from Daniel Osley with Wells Fargo. Your line is open.
Thanks, good morning.
Speaker Change: Morning, so following up on your commentary on national, you know, what are some of the ways that you can address the continued weakness there, outside of general programmatic growth, and then how should we think about the pace of digital conversion throughout the remainder of the year?
Speaker Change: On the digital conversion question, we're still pacing to meet our goal, something north of 350 deployments.
Speaker Change: . You know, National has been a bit of a quandary for us, you know, it's . . .
Speaker Change: We sometimes big customers, there can be a turnover in a CMO and they want to make a change and so they'll pull out.
Speaker Change: They're out of home spend and maybe go to digital, but it works the other way too. For example, I had a great visit to CMO of Packer Barrel at the Boston Conference.
and they seem to have...
Speaker Change: Successfully turned the corner on their business and are telling us that they're going to plus up a little bit on their body.
Speaker Change: So, you know, it can ebb and flow as you've probably heard me say many times, the local dollar tends to be very steady and the national dollar tends to be a little more fickle.
Speaker Change: But at the end of the day, it's been my experience that if you smooth out the cycles, they grow at roughly the same pace.
Thank you.
Thank you.
Speaker Change: And as a reminder, if you would like to ask a question that is star and one to join the queue?
Speaker Change: We'll take our next question from Jonathan Navert with TD Cowan. Your line is open.
Speaker Change: Hey, good morning. Hey, Jonathan. Wonderful. Hey, so you kept your 2025 A to 4 per share guidance unchanged, despite you purchasing approximately 1.4 million shares through April . Does this imply that your absolute A to 4 dollar expectations have declined, or is there another offset that I'm not considering?
Speaker Change: You got a little garbled on the last part of that question, but I'll let Jay hit the AFFO for sure.
Speaker Change: Good morning, Jonathan. You know, we repurchase those shares late in the quarter.
Speaker Change: and just from a conservative perspective, we haven't included that in the four-year guide. So we still anticipate that even outside of those shared repurchases that we would be affirming AFFO guidance.
Okay.
Speaker Change: All right, thanks. The second one is, you know, although revenue increased every year, even that dips lightly, can you provide any additional color on the primary drivers of this expense growth during the quarter and specify if there were any notable one-time items that we should model going forward?
Yeah, I'll let Jay hit that one as well, but- [inaudible]
Keep in mind, we are going through a...
Speaker Change: and Enterprise Conversion that has elevated expenses here at Corporate, but Jay, you want to hit that? And there were a couple of things, something that were what I would call sort of one time on the sales commission's front.
Speaker Change: We ran a sales contest to kind of make up for some of the headwinds in Q1 so that was kind of elevated.
Health insurance continues.
Speaker Change: to be an elevated cause, and I think you're hearing that from from most corporates. And then we had some one-time expenses.
Speaker Change: that came through in Q1 in a couple of our outdoor regions that we don't expect to continue going forward. We did beat our expectations in Q1, and again for the full year, we still anticipate acquisition of adjusted consolidated expenses to come in around 3% as budgeted.
Got it.
Speaker Change: And just from my last one, so we have some detail on the premiere after acquisition. Could you give us some more color on the acid profiles of the 10 acquisitions that you did during the first quarter? Thank you.
Speaker Change: Very predictable acquisitions. They're not large in and of themselves, but they add up to be quite creative as we move through the year.
Speaker Change: I like to qualify a characterism as high-quality, re-qualified assets that are within our existing footprint.
Jonathan, you're still there?
Yes, yes, I am. Thank you for the response, Paul.
Yep.
Speaker Change: It appears we have no further questions at this time. I'll turn the program back to Sean Reilly for closing remarks.
Speaker Change: This does conclude today's program. Thank you for your participation and you may disconnect at any time.
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