Q3 2025 Lamar Advertising Co Earnings Call
Speaker #6: Please be aware that each of your line is in a listen only mode . At the conclusion of the company's presentation , we will open the floor for questions .
Speaker #6: To ask a question , please press star one on your telephone keypad . 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 condition and results of operations .
Speaker #6: 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 .
Speaker #6: Lamar has identified . Important factors that could cause actual results to differ materially from those discussed in the in . In this call , in the company's third quarter 2020 earnings release and its most recent annual report on Form 10-K .
Speaker #6: Lamar refers you to those documents . Lamar's third quarter 2020 earnings release , which contains information regarding regulation G regarding certain non GAAP financial measures , was furnished to the SEC on a form 8-K this morning and is available on the investor section of Lamar's website .
Speaker #6: I would now like to turn the conference over to Sean Riley . Mr. Riley , you may begin .
Speaker #7: Thank you Katie . Good morning all , and welcome to Lamar's Q3 2020 Earnings Call . For the third quarter , we delivered solid operating results with consolidated revenue growth improving to 2.9% on an acquisition adjusted basis led by National Programmatic , which had its strongest period of growth since Q2 of 2022 .
Speaker #7: On the local level , the cautious vibe still prevails and as a result , Q3 looked a lot like the rest of 2025 has .
Speaker #7: With year over year growth in the low single digits . As we noted in the release , we are pacing to reach our previously provided guidance for full year AFFO per share .
Speaker #7: That is despite difficult political comps . In October , which we knew would be a headwind . Our pacings for November and December are encouraging , as are our conversations thus far with customers .
Speaker #7: About 2026 , which for a variety of reasons , we believe sets up to be a good year so far . Our pacings bear that optimism out back to Q3 .
Speaker #7: Categories of strength included services , health care , and financial . While beverages and real estate were weaker , as was our government nonprofit category , which has been hampered by some of the uncertainty emanating from Washington , D.C.
Speaker #7: national and programmatic led the way with growth of 5.5% , while local was plus 1.6% . Insurance was very strong and we benefited from our largest ever pharmaceutical buy , which launched towards the back end of Q3 and extends through most of Q4 and includes both analog and digital inventory .
Speaker #7: Our experience with that campaign has provided valuable insights into the data that we need to deliver to help pharma customers make their buying decisions , and we are hopeful that pharma will continue to be a growth vertical for us .
Speaker #7: As we have discussed before , national can be a bit lumpy and we had a lot of political that came our way through national channels in of 2024 .
Speaker #7: As a result , National is likely to be flattish in Q4 2025 . Ex-political , however , National should be up nicely in Q4 , and we do like what we're hearing about 2026 from national buyers .
Speaker #7: Our digital platform continues to be very popular with both local and national advertisers . For the quarter , digital billing grew 5% , including 3.4% on a same store basis and represents today about 31% of our billboard billing .
Speaker #7: We now have more than 5400 digital billboard faces across 155 Lamar markets on the M&A front , the integration of the Verdes assets , which we acquired in an upright transaction in early July , the first ever in the out-of-home space , is going very well .
Speaker #7: We closed another 18 purchases for nearly 47 million in Q3 , bringing the year to date cash spend Q4 nearly 134 million at the end of September .
Speaker #7: For the full year acquisition spend , excluding Verdi , it's likely to be north of 175 million , including Verdi . We'll end the year spending plus or minus 300 million on accretive transactions .
Speaker #7: Overall , I'm pleased with how resilient the business is proving to be in a period of fairly significant macroeconomic uncertainty , and I am confident that we will finish 2025 successfully and carry momentum into 2026 .
Speaker #7: With that , I will turn it over to Jay to walk you through more numbers , including our successful capital market transactions . At the end of Q3 Jay .
Speaker #8: Thanks , Sean . Good morning , everyone , and thank you for joining us . We continue to experience positive momentum in our portfolio during the third quarter .
Speaker #8: Acquisition , adjusted revenue increased 2.9% from the same period last year , accelerating 100 basis points over the second quarter . Our billboard regions all grew in the low single digit range , led by the Atlantic and Northeast , which improved 3.8% and 3.3% , respectively .
Speaker #8: Our airport and Logos divisions also outpaced the broader portfolio , with airport growing 5.8% , followed by logos , which increased 5.2% . Acquisition adjusted operating expenses increased 3.7% in the third quarter , including one time severance costs associated with termination of our Vancouver transit contract on July 31st , as well as increased costs from phase two of our technology implementation .
Speaker #8: These items accounted for approximately 125 basis points of expense growth over the comparable period in 2024 and were both included in our revised guidance in August.
Speaker #8: We still anticipate full year acquisition adjusted operating expense growth in the 2.5 to 2.75% range . Adjusted EBITDA for the quarter was $280.8 million , compared to $271.2 million in 2024 , which was an increase of 3.5% on an acquisition .
Speaker #8: Adjusted basis , adjusted EBITDA increased 2% despite the growth in operating expenses . Adjusted EBITDA margin for the quarter remained strong at 48% , essentially flat year over year .
Speaker #8: Adjusted funds from operations totaled $226.5 million in the third quarter , compared to $220.7 million last year . An increase of 2.6% . Diluted AFFO per share increased 2.3% to $2.20 , versus $2.15 in the third quarter of 2020 .
Speaker #8: For local and regional sales accounted for approximately 78% of billboard revenue in Q3 , growing for the 18th consecutive quarter Q1 of 2021 .
Speaker #8: A Covid impacted quarter was the last in which we saw a year over year decline in local and regional sales . This consistent performance exhibits the resilience of our core local advertising business and differentiates the company from our group on the capital expenditure front , total spend for the quarter was approximately $50 million , including $13.9 million of maintenance CapEx through the first three quarters of the year .
Speaker #8: CapEx totaled $118 million , $37 million of which was maintenance , and for the full year , we anticipate total CapEx of $180 million with maintenance comprising $60 million .
Speaker #8: We ended the quarter with total leverage of three times net debt to EBITDA . As defined under our credit facility , which remains amongst the lowest level ever for the company .
Speaker #8: Our secured debt leverage improved to 0.65 times , and we're comfortable in compliance with both our total debt incurrence and secured debt maintenance test against covenants of seven times and 4.5 times , respectively .
Speaker #8: For the full year , we expect total leverage to remain at three times with secured leverage consistent as well . Below one times net debt to EBITDA .
Speaker #8: Lamar continues to enjoy access to both the debt and equity capital markets . During the quarter , we took significant steps to further improve our industry leading balance sheet , raising a total of $1.1 billion .
Speaker #8: With the positive market backdrop , we opportunistically refinanced the company's $600 million term loan b due February 2027 , which was our nearest term .
Speaker #8: Maturity . The offering was well received and given the demand , we upsized the transaction to $700 million . In addition , we were able to maintain a spread of 150 basis points over sulfur , which remains the lowest price term .
Speaker #8: Loan B in the market . Following the successful launch of the term loan , we accessed the high yield bond market with a new $400 million Senior notes offering .
Speaker #8: The bond deal was oversubscribed , allowing us to achieve the lowest ever spread to treasuries for an eight year . In the high yield market , with a coupon of five and 3/8 percent .
Speaker #8: We are extremely pleased with both capital markets transactions , which extend our maturity profile and significantly enhance liquidity . Excess proceeds were used to repay Outstandings under the company's revolving credit facility and are securitization .
Speaker #8: As of September 30th , we had $834 million in total liquidity , comprised of approximately $22 million of cash on hand , $742 million available under our revolving credit facility and $70 million available on the AR securitization at quarter end .
Speaker #8: There were no borrowings outstanding on the revolver , and 180 million . Dollars outstanding under the AR securitization program . We had approximately $3.4 billion in total consolidated debt , and our weighted average interest rate was 4.6% .
Speaker #8: With a weighted average debt maturity of approximately five years . As a result of the focus on our balance sheet , the company is well positioned with an investment capacity well over $1 billion .
Speaker #8: 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 this morning , we affirmed our full year guidance and expect AFFO to finish the year between $8.10 and $8.20 per diluted share .
Speaker #8: Cash interest in our guidance totaled $152 million , and assumes Sofr remains flat for the balance of the year . As I touched on earlier , maintenance CapEx is budgeted for $60 million and cash taxes are projected to come in around $10 million , which excludes any taxes related to disposition of our interest in Vystar media .
Speaker #8: And finally , our dividend . We paid a cash dividend of $1.55 per share in each of the first three quarters this year .
Speaker #8: Management's recommendation will be to declare a regular cash dividend of $1.55 per share for the fourth quarter , as well . This recommendation is subject to board approval , and we will communicate the board's decision next month .
Speaker #8: The company's dividend policy remains to distribute 100% of our taxable income and for the full year , expect to distribute a regular dividend of $6.20 per share , excluding any required distribution resulting from the Vystar sale .
Speaker #8: Again , we are pleased with our financial position and strong balance sheet , which we view as an asset and competitive advantage in the out-of-home industry .
Speaker #8: I will now turn the call back over to Sean .
Speaker #7: Thanks , Jay . I will cover some familiar key performance metrics , and then we'll open it up for questions on the Billboard side , our static inventory grew quarter over quarter , approximately 2% .
Speaker #7: While as I mentioned , digital grew a tad over 5% . As for political Q3 this year was 2.7 million versus 6.1 million for last year's Q3 .
Speaker #7: Full year to date political this year has been 7.4 million , compared to 29.2 million year to date . In 2024 . By the way , 2024 , as I mentioned , 29.2 million .
Speaker #7: That was over 7.5 million for 2023 , indicating that we certainly will have political as a tailwind in 2026 as opposed to a headwind that it represented this year .
Speaker #7: A quick word on October and political last year we did over 11 million in political in the month of October . We replaced all but about 3.5 million of that ex-political October grew 2.9% quarter year , year over year , month over month .
Speaker #7: As we mentioned , for several quarters now , our pro forma increases are being driven primarily by rate . Also , in terms of digital units in the air , we ended Q3 with 5442 digital units in operation , an increase of approximately 450 .
Speaker #7: Year to date , over last year to date . This includes acquired units . Also , as I mentioned , same board digital revenue grew 3.4% .
Speaker #7: Q over Q local National split approximately 78% was local and 22% national . In Q3 , growth for local was 1.6% and growth for National was 5.5% .
Speaker #7: Programmatic grew a little over 13% in Q3 . I don't usually tick off individual customers , but I do believe that an impressive list of accounts .
Speaker #7: Really are indicative of how we're feeling about National year over year and going into 2026 . The top five accounts in terms of increases in their spend with us in Q3 are as follows Geico , Progressive Insurance , JPMorgan Chase , Coca-Cola and Johnson and Johnson again , that that list of blue chip customers I believe points to our optimism going into 2026 .
Speaker #7: With that Katie , let's open it up for questions .
Speaker #6: Thank you . If you would like to ask a question , please press Star one on your keypad to leave the queue at any time .
Speaker #6: Please press star two . Once again , that is star one . If you would like to ask a question , we'll pause for just a moment to allow everyone the chance to queue .
Speaker #6: Our first question will come from Cameron McVey , with Morgan Stanley . Your line is open .
Speaker #9: Hey , good morning Sean and Jay . How you doing ?
Speaker #7: Hey .
Speaker #8: Cameron .
Speaker #9: I was curious as you look ahead into 2026 , you know how you're thinking about the growth opportunity and what you see for your business as a primary growth drivers next year ?
Speaker #9: And then secondly , you know , also curious how you're thinking about the M&A environment . And if we should expect another acquisitive year ahead .
Speaker #9: Thanks .
Speaker #7: Yeah . Cameron , regarding the acquisition activity . Yeah , we do feel good . We feel like this has been a great year .
Speaker #7: You know , when we look into 2026 and the momentum from the approximately 300 million we spent this year , that's certainly a growth driver for AFFO per share , right .
Speaker #7: Other growth drivers are just our pacings our are stronger , markedly stronger as we peer into 2026 . You know , this day in 2025 .
Speaker #7: Last year on the same day as we were looking into 2025 , you know , patients were good . But not near the strength that we're seeing going into next year .
Speaker #7: And then , of course , as I mentioned , we'll have political as a tailwind . And , you know , that that makes a difference .
Speaker #7: So , you know , for all those reasons , 2026 . The setup is real good .
Speaker #9: Great . And then I also just wanted to ask about , you know , potential AI company related advertising exposure . Is that has that been an influence on the national growth we saw at all this quarter ?
Speaker #9: And is that something maybe an opportunity going forward ?
Speaker #7: So as as Jay mentioned , and we've talked about for several quarters now , we are going through a pretty extensive enterprise conversion and that is setting us up to realize the benefits of AI in 2027 .
Speaker #7: We'll finish the conversion about halfway through next year . And of course , you know , that's going to have a lot of benefits .
Speaker #7: It's going to have some efficiency benefits . It's also going to , you know , once all the consultants leave the building , we won't have that additional OpEx and CapEx spend that we've had the last several quarters .
Speaker #7: You know , in terms of AI driving our business , you know , without speculating too much , I can say with some confidence that AI is certainly good at two things .
Speaker #7: Number one is words . And number two is pictures . And when you think about what we do in the out-of-home space , that's what it is .
Speaker #7: It's words and pictures . So it can't help but help us .
Speaker #9: Great . Thank you .
Speaker #6: Thank you . Our next question will come from Jason Bazinet with city . Your line is open .
Speaker #10: I also had a , I think , a simple question on 2026 , other than the political tailwinds that you called out . Am I right that the benefit you'll get next year from the Verde acquisition is about the same size as the headwind you'll see from the Vancouver exit ?
Speaker #10: Like those two offset each other . So it's just a clean a clean year . Other than the political tailwinds .
Speaker #7: That's that's a good observation . Jason . And your , you know , directionally correct . Now when we report same store growth , you know , we will adjust for the loss of Vancouver and the addition of Verde .
Speaker #7: So so your your pro forma numbers are going to be clean . But you're you're right in terms of absolute revenue expectations for 2026 .
Speaker #7: It's a pretty decent offset .
Speaker #8: The only thing I would add there Jason you're correct on the top line . But if you recall the Vancouver contract , while high revenue had , you know , relatively low EBITDA contribution , I think it was , you know , below 10% .
Speaker #10: Significantly better flow .
Speaker #7: Through .
Speaker #10: Understood . Makes sense . Thank you .
Speaker #6: Thank you . Our next question will come from David Karnofsky with JPMorgan . Your line is open .
Speaker #11: Hey . Thank you Sean , with the auto insurance , your comments are consistent with clear from this morning and wanted to see if you could expand on what's going on with the vertical and whether you think the strength here is sustainable .
Speaker #11: Just given the category has been choppy over the past few years , and then can you just remind us how to think about political specifically during a midterm cycle and how that might compare to your prior presidential result ?
Speaker #11: Thank you .
Speaker #7: Yeah . Let me hit the the political first because I , I think it is instructive on what an off presidential does . Okay .
Speaker #7: So in 2022 over 2021 and 2022 , we did approximately 21 million in political and and that's that's that's year to date , right .
Speaker #7: So that doesn't include Q4 of those years . And in 2021 we did 7.9 . So that's sort of your order of magnitude and should should give you a little bit of feel for it .
Speaker #7: Look on insurance . Here's what's most gratifying from my point of view . You know several quarters back the auto category and insurance they were having trouble with their own actuarial results .
Speaker #7: And so they pulled back and what's gratifying when you see a large customer pull back for whatever reason it is , it's gratifying to see them come back in because that means it's not the medium that that they were concerned about .
Speaker #7: It was , you know , sort of their own internal calculations around their own business and how they're feeling about their business . So that's number one .
Speaker #7: And I would say that also the programmatic channel has become very enticing for both of those customers . They buy across both static and digital .
Speaker #7: However , a lot of their spend is coming through the channel .
Speaker #11: Thank you .
Speaker #6: Thank you . Our next question comes from Jonathan Navarrette with TD Cowan . Your line is open .
Speaker #12: Hey thank you . I'm curious to see how you guys thinking about demand for the World Cup in 2026 . I know that Jcdecaux experienced some some good bumps there when they had the Euro 2024 .
Speaker #12: So just wondering how you guys are thinking about that .
Speaker #7: We're feeling very good about it actually , I didn't make it a talking point , but when you add political to the that mix of of the World Cup , that gives us a lot of optimism around how 2026 is going to shape up .
Speaker #7: For sure .
Speaker #12: Great . So I guess the second quarter is also sees a nice bump there . And just the last question , can you remind us what is the potential distribution for the Vista .
Speaker #12: So can we expect that to be all cash if there is this distribution in stock ? Like how can we how can we see this coming back to shareholders ?
Speaker #8: Sure , sure . It'll be all cash as we've done in previous years where we've issued a special cash distribution at the end of the at the end of the year .
Speaker #8: And we'll do that in Q4 on December 31st , alongside our regular cash dividend . And right now , we anticipate that it's going to be around 25 , $0.25 .
Speaker #8: You know, give or take a penny, depending on how the performance comes in in November and December.
Speaker #12: Great . Thank you .
Speaker #6: And once again , if you would like to ask a question , please press star One on your keypad . Now , our next question will come from Daniel Owsley with Wells Fargo .
Speaker #6: Your line is open .
Speaker #13: Thanks . Good morning .
Speaker #7: Hey , Daniel .
Speaker #14: Sean .
Speaker #13: Hey , Sean . You noted an impressive list of national customers increasing their spend with Lamar . Can you further unpack the inflection you're seeing on national and your confidence that national at the national turnaround is sustainable ?
Speaker #13: Thanks .
Speaker #7: So in addition to what we're hearing from those , those large national accounts that I rattled off . Conversations around 2026 and plans for 2026 from national accounts in general .
Speaker #7: It feels better , you know , good momentum ex-political in the back half of this year is going to carry in . We believe , carry over into 2026 and you know , the the vibe feels better going into next year at this time this year than than it felt this time last year coming into 2025 .
Speaker #13: That's helpful . And that's a quick follow up . Your transit segment continues to perform nicely just given the strength of airports advertising across the industry .
Speaker #13: Do you expect to bid on any additional RFPs on the airport side ? Thanks .
Speaker #7: Great question . As as I've said several times , when you think about Lamar and Transit and airports , think about a large portfolio of small and middle market transit and airport contracts .
Speaker #7: So yes , we will continue to pursue airports in the sort of middle market arenas sort of outside the top 20 Dmas , you know , clear Channel is dominant in that top 20 DMA space for airports .
Speaker #7: They do a great job . And we we kind of specialize in the the small and middle market airport space . And it has been a good strong growth for us .
Speaker #7: A growth vehicle for us .
Speaker #13: Thank you .
Speaker #6: Thank you . At this time , this concludes our Q&A session . I'll now turn the meeting back over to Sean Reilly . For any final or closing remarks .
Speaker #7: Well , thank you all for your interest in Lamar . And we certainly look forward to visiting in February of 2026 . That's it .
Speaker #7: Katy , thanks .
Speaker #6: Thank you . That brings us to end of today's meeting . We appreciate your time and participation . You may now disconnect . And thank you .